Diesel Prices Smashed Their All-Time Record By 50 Cents/Gallon In The Overnight Session

Gasoline prices were already up more than 12 cents this morning, and diesel prices were up more than 25 cents, and yet it feels like a nice calm day compared to the chaos we’ve just experienced. 

Diesel prices smashed their all-time record by 50 cents/gallon in the overnight session Wednesday, trading as high as $4.67 (vs the 2008 high of $4.15) before plummeting more than $1.30/gallon on the day, and settling down 97 cents. That’s a pretty volatile year for diesel prices, and to have it happen in a day is a good lesson for the bandwagon jumpers who have been trying to find new ways to “invest” in energy contracts in recent weeks. 

It’s ironic that diesel prices dropped $1/gallon on the day that the DOE reported some very bullish inventory data for distillates. US diesel inventories have been tight, well below the seasonal ranges in most markets, for some time, and now we’re seeing a big drop in imports and surge in exports as the global supply chain races to reconfigure. Add to that demand levels that are above the seasonal range and you it’s easy to understand why diesel stocks dropped to an 8 year low yesterday, and the extreme backwardation that we’ve been dealing with the past few weeks. Currently the US is sitting on approximately 26 days’ worth of diesel supplies, vs a seasonal average of 35 days, and with refining capacity dropping sharply the past two years thanks to COVID and race to “go green” there’s much less cushion to absorb a supply shock like we’re experiencing.

RINs and Carbon credits saw a recovery rally as refined products plummeted Wednesday, in what appears to be some hope that prices cooling may prevent an extreme demand shock like we saw in 2008. 

From a chart perspective, we’ve never seen anything like what we’ve witnessed in the past two weeks, but despite yesterday’s huge pullback, the bullish trends on the weekly charts are still intact and pointing to higher prices ahead. 

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.