Benchmark diesel prices rose for a third straight week as oil futures rose again.
A 4.1-cent-gallon increase in the average benchmark retail diesel price posted on Monday could be the start of larger hikes in the coming weeks.
The weekly Department of Energy/Energy Information Administration price rose by that amount to $3.602 a gallon. It was the highest price since October and the third consecutive week of gains.
After weeks of mostly sliding down, several factors have seen oil turn around sharply.
Monday’s low-sulfur diesel price was the highest since settling at $2.5236 a gallon on the CME Commodity Exchange at $2.5333 a gallon. From a recent low of $2.058 a gallon on Sept. 10, ULSD prices were up 46.56 cents by Monday’s settlement.
But what’s even more surprising is what Price has done recently. ULSD settled at $2.3507 a gallon Thursday, up 18.26 cents in three trading days. Most of those gains came on Friday and Monday after new sanctions on Russian oil shipments were lifted.
The most recent trigger for the outcry is the Biden administration’s decision to join the United Kingdom in reimposing those sanctions on Russian oil shipments, though the impact of those initial sanctions is widely believed to be lacking. Faded in time.
Bloomberg cited a Morgan Stanley report saying the new sanctions regime “has gone beyond expectations.”
“It will take some time to integrate these measures, but this will create negative risks for oil supply, at least for some time,” Morgan Stanley’s report said.
According to a report from S&P Global Commodity Insights, the sanctions hit key Russian oil producers Gazprom Neft and Surgutneftegas, as well as various vessels, oil service equipment and insurance companies, among other targets.
A story from S&P Global Commodity Insights quoted its analyst Rahul Kapur, head of shipping analytics and research, as saying, “With so many vessels sanctioned, this set of sanctions poses a challenge to all opportunities for traders, charterers and marine insurers.” In the near future, Russian oil will flow to Asia, especially India and China.
Those sanctions, and the prospect that they could limit Russian oil exports to some extent, are seen as the main driver of two days of oil price gains in futures markets.
Total fuel price inflation doesn’t capture what’s going on with diesel, which outpaces crude.
Winter is also playing its part in the increase, with diesel prices rising at a faster rate than crude oil. Diesel is a distillate like heating oil, and cold weather is always the reason for the strength or weakness of diesel in winter.