US Diesel Prices Surge Amid Louisiana Refinery Fire and Decreasing Oil Rig Count

US Diesel prices climbed by 1% on Friday, causing oil futures to jump to a one-week high. The US oil rig count dropped, and a fire at a Louisiana refinery has created uncertainty in the Diesel market. According to data from Intercontinental Exchange Europe, Brent crude futures settled at $84.48 a barrel, up by 1.3% compared to the previous trading day. On the other side, US West Texas Intermediate (WTI) crude settled at $79.83, a hike of 78 cents or 1.0%.

A large fire has been caught at a naphtha storage tank in the Refinery of Garyville, Louisiana, on Friday afternoon. The Marathon’s Petroleum refinery, located along the Mississippi River in south-eastern Louisiana, has a refining capacity of 596,000 barrels of crude oil per calendar day (bpcd). However, it has been reported that the fire has not been on the tank itself. It was on the circumference of the tank where the naphtha had been pooling.

Diesel futures have risen to a near seven-month high and have resulted in the Diesel crack spread, which measures the refining profit margins, to jump to its highest since 2023. The main concern here has been the Diesel crack spread and the supply shortages of Diesel if refineries go for maintenance shutdown. More risk factors can be added by the Louisiana refinery fire and drop in the US oil rig count.

This is the ninth month in a consecutive row that a US energy firm has cut the number of active oil rigs in August, as stated by energy services firm Baker Hughes in a report. The total count of oil and natural gas rigs, an early indicator of future Diesel output, fell for the fourth month in a row. On 25th August, the count fell by 10 to 632, the lowest number since February 2022. In the last year, February, the oil and gas rigs count fell by 8 to 512.

Despite weak economic data from Germany, the EU’s largest economy, and a stronger dollar against a bunch of other currencies, crude oil prices have risen. The current state of North America has been fighting with inflation. After the statement on the possibility of further rate hikes by US Federal Reserve Chairman Jerome Powell, the dollar rose to a 3-months high on Friday. Higher interest rates can result in a sluggish economy. Also, a high-valued dollar can make Diesel more expensive and decrease the number of transactions in the Diesel market. Moreover, a survey found that fear of further interest rate hikes both in the long term and short term impacted the consumer sentiments in the U.S. Diesel market.