The U.S. trucking industry appears poised for a rebound, and that bodes poorly for a diesel market already struggling with some of the lowest inventories in more than two decades.
Domestic demand for goods is rising after hitting a seven-month low in April, industry figures showed. Construction projects spurred by President Joe Biden’s stimulus programs are also increasing the use of diesel truck fleets, said Craig Fuller, CEO of data and pricing information firm FreightWaves Inc. This means that diesel consumption will increase at a time when household fuel is stored. are at the second lowest seasonal level since 2000.
At risk are farmers who need diesel to harvest crops and homeowners who rely on its sister fuel, heating oil, to get through the winter. Diesel is so deeply embedded in manufacturing and transportation that its cost permeates the supply chain, and a reduction in prices would almost certainly point to broader inflationary pressures in everything from groceries to electronics.
Diesel futures are already trading near their highest level since January in New York, and the premium for near-term supplies over deliveries later this year is discouraging arbitrageurs from storing fuel in storage tanks. storage At the retail level, diesel dominates 30% more than the five-year average, according to data from the AAA auto club.
Bob Costello, chief economist at the American Trucking Association, expects “small improvements” in freight demand. Meanwhile, government analysts at the Energy Information Administration on Tuesday raised their forecast for full-year 2023 distillate consumption, the category that includes diesel and heating oil, to 3.93 million barrels per day
The tight supply of diesel in the US means that a shortage is imminent worldwide. The decision by the OPEC alliance to expand production limits is forcing refiners to use different types of crude, a change that JPMorgan Chase & Co. estimates that it reduces fuel yields by up to 1 million barrels per day. Add to that the fact that Russia is curbing diesel exports and the global supply picture looks grim.
