October Sees Over 2% Increase in Diesel Prices Despite Growing US Stockpiles

Diesel prices in the US have witnessed a hike again in October month. Though markets have been keenly watching the US central bank meeting for clues on interest rate policy, the Middle East conflict has been catching attention. US crude stockpiles have risen while gasoline and distillate balances have seen only a modest change in EIA’s weekly inventory report. Moreover, oil refineries in the US have cracked up their Diesel output for the upcoming winter demand for heating oil and jet fuel.

As revealed by the US weekly Petroleum status report by the Energy Information Administration (EIA), the crude inventory balance in the US has increased by 0.76 million barrels during the week ending October 20. In the previous week ended October 13, crude inventory, including Diesel, has reported a build of 1.371 million. The export of Diesel has also increased to 4.79 million barrels per day against the prior week’s export rate of 4.33 million. As of October 27, the prices of Diesel in the North American domestic market have been traded at USD 4.63 per gallon, DEL-Washington.

Brent crude futures for January have been up by 2.5%, while US West Texas Intermediate crude futures have gained roughly 2.8%, signaling an improved future for Diesel also. It is broadly anticipated that the Federal Reserve will maintain interest rates at their current level. Diesel prices had been expected to settle lower on record US crude output and the gloomy economic scenario of China. However, despite that, signs of further escalation of the Middle East conflict have raised concerns about Diesel supply disruptions. Moreover, the naturally occurring El Nino climate pattern has been contributing to Panama’s drought, raising further concern about the reduced number of shipments through this waterway. Meanwhile, several other factors like Russia’s crude production cut, reduced oil rig count, and less refinery capacity have impacted the inventories and tightened supplies of Diesel in October month.

The average distillate crude oil inventories in the US have recorded 20 million barrels in September, which has been below the prior 10-year average. At the same time, the European inventories have been 24 million barrels, below their respective averages. It has been reported that demand for distillate in the US has risen to its highest last week. Exports of Diesel and heating oil from US refineries have increased to 6.5 million barrels in September, the highest in more than a year. While exports of US petroleum products have surged to 6.2 million bpd during the week ending October 13., it reached a record high, as per EIA. In October, however, Gasoline prices decreased due to reduced demand on the back of several storms and blocking roads.