U.S. Diesel Prices May Fluctuate Further in Long-Term Amidst Attack on Israel

Diesel prices in the United States of America surged again in the month of September 2023 since the oil rig count in the U.S. has declined and picked up domestic inventory consumption. Hamas militants have launched several rockets targeting Israel, which have led to long-term uncertainty in the crude oil market.

According to EIA’s recently released petroleum status report released on September 27, 2023, crude oil inventories in North America decreased by 2.2 million on September 22, 2023, when compared to the previous week. The Baker Hughes count has been dropped by 11 and stood at 149. A dozen have dropped the Enverus weekly count from last week. In the North American market, Diesel has been trading at USD 4.52 per Gallon as of September 29, 2023, with a hike of 13 percent.

On the international front, Crude oil prices could surge because of the recent attack of Hamas on Israel. However, for now, the overall impact on Diesel and Gasoline prices has been expected to be subtle unless there is further escalation of the conflict, as per energy experts.

Since Israel is not a major player in the crude oil market, short-term supply shortages of Diesel are not likely to be the outcome. However, some fund managers have suggested it can gradually impact Diesel and Gasoline prices, especially when Diesel inventories have been low and projected further reductions due to Saudi and Russia’s crude production cuts. Brent crude prices could even reach USD 110 per barrel, as projected, which might lead to a further hike in Diesel prices.

A higher executive of a wealth management company under the knee-jerk reaction to the Hamas attack, Diesel prices may go up 11-12 percent soon. Analysts have also suggested that support for Israel from America can tap into its oil inventory and result in a price hike of Diesel. On the political end, the U.S. will likely increase its crude oil production to combat domestic inflation and prevent Russia from earning more profit. Furthermore, Israel might become more aggressive in regaining its control over Gaza, which is a big concern.

The geopolitical situation is currently uncertain, and being cautious is a wise decision. Furthermore, a higher price outlook of Diesel might cause a decrease in demand for the product. It has been noted that market reactions have not been as severe as expected. Meanwhile, U.S. bond yields have risen substantially by approximately 5 percent.