Summer 2018 could get to be a hot one for diesel fuel. High diesel prices are in the forecast, given a global supply-and-demand scenario that sees inventories tracking the lean side and consumption on the rise.
The case for bolder diesel fuel prices is being made by a number of research groups. We’ve pulled together three key diesel forecasts and created a visual to help you see the big picture.
If you are interested in diesel fuel prices, check out the OPIS Spot Ticker to see bulk prices trade in real time.
Forecast # 1: Energy Aspects Focuses on Global Diesel Fuel Supply/Demand
Robust demand and falling inventories are set to pressure the diesel prices and market this summer, while the rally in crude hampers production growth, according to Energy Aspects.
Here are a few key takeaways:
- Global diesel demand rose by 750,000 b/d at the end of winter 2018, exceeding global supply growth of just 410,000 b/d.
- Stocks of on-road diesel are forecast to have fallen by nearly 18 million bbl, or 160,000 b/d, since the start of this year in the Atlantic basin, compared to a slight increase over the same period in 2017.
- U.S. bulk terminal diesel stocks are as low as 68.2 million bbl, or 17.4 days of forward cover, a level not seen since the third quarter of 2014.
- E.U. commercial diesel inventories are around 10 days of forward cover, while its stock buffer may be as low as 21 million bbl.
"The market could therefore be in for a torrid summer if supply and demand patterns are anything like those in 2017," said Energy Aspects. "Diesel markets are tightening already, and, with crude rallying, production growth will be a challenge in the near term."
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If you need to stay on top of wholesale diesel prices, find out more about our rack reports.
Forecast #2: JBC Energy Spotlights Russia and India
Adding to the picture of the current strapped supply situation, JBC Energy turned its attention to Russia.
To set the stage, combined diesel and gasoil stocks held in independent storage in the key Amsterdam-Rotterdam-Antwerp hub were noted at the lowest level this year in spring 2018 due to Russian refinery maintenance, rising inland demand and exports to other regions.
In the meantime, cold weather in Russia over March, with temperatures having averaged 6 degrees Celsius lower year on year, provided a strong boost to Russian demand for gasoil/diesel, JBC Energy said in a market note.
Let’s quantify that. Russian gasoil/diesel demand rose by 80,000 b/d year on year in March (or 12%), reaching its highest levels in March since at least 2011, according to Ministry of Energy data.
Some additional support likely came from a still strong healthy economic performance, as road freight transportation increased by 2.1% year on year in March vs. 2.7% in February, while industrial production growth stood closer to 1.0% compared with 1.5% in February. High demand weighed strongly on exports, which fell by 90,000 b/d year on year, according to JBC Energy, citing data from Rosstat.
Looking to other regions of strong consumption, Indian oil demand growth rebounded in March after a comparatively weak February, JBC Energy also said. Sales were up 315,000 b/d year on year with about 70% of this figure accounted for by diesel, gasoline and jet.
Diesel continues to show by far the strongest uptick in volumetric terms in India, with growth in the first quarter of 145,000 b/d, double that of gasoline. That’s very positive for Asian margins in an already tight market, according to JBC Energy.
If you need to watch diesel at the retail level for your fleet, get more information about our Truckstop Spread Report with retail diesel fuel prices at 6,000 truckstops across the United States and Canada.
Forecast #3: Bank of America Merrill Lynch Looks Ahead to Potential Price Shift
The bullish price picture could be setting the stage for a bearish swing in months to come, however.
High diesel prices and falling stocks could encourage surging output of the middle distillate over the coming months, according to a Bank of America Merrill Lynch note. That could tip the scales and pull prices back.
"With diesel inventories at low level, we are starting to see a yield rotation due to a relative price shift. Diesel is now more expensive than gasoline for the summer, so distillate cracks could ease going forward," said the BofA Merrill Lynch Global Research report.
"A surge in diesel output over the coming months and a sluggish gasoline market do not paint a great picture for simple margins," the note added.
With the market on track for a volatile ride, the best place to stay on top of diesel price fluctuations is the real-time OPIS Spot Ticker. Anticipate market fluctuations and time your purchases and sales to save money and maximize profits.