In The News

Enjoy drop in diesel prices while it lasts

A market analyst says that if Vegas were to put odds on what happens to diesel prices in the second half of the year, his wager would be on an increase.

Tom Kloza, chief oil analyst for the Oil Price Information Service, says a steady month-long decline in diesel prices is part of traditionally weak global demand this time of year and that the lull could be short-lived.

“Historically, the second calendar quarter of the year is the weakest quarter for crude oil prices,” Kloza told Land Line on Tuesday, May 29. “With the exception of gasoline, it’s probably the weakest quarter for most petroleum products.”

Last week, oil prices hit a seven-month low while diesel prices were at their lowest point since February. The national average diesel price on Tuesday was $3.897 per gallon, down nearly 6 cents for the week and 23 cents during the past six weeks.

Market factors such as demand, the European economy, and political happenings in oil-producing countries affect the global market. Kloza says the factors have combined to keep diesel prices at bay the past few weeks.

An increase on the demand side could send prices higher this summer and later in the year, he adds.

“The one thing that is a little bit scary is diesel stocks are very low,” he said. “Diesel inventories in the U.S. and abroad are quite low. I think it’s a level field for the next few weeks, even a little weakness, but I would suspect we’re going to see mostly increases in the second half of the year. And diesel is actually going to be the product that outperforms gasoline and probably outperforms crude.”

Kloza says if he were a betting man, his wager would be on the national average price for diesel rebounding to $4 and above in the second half of 2012.

For the time being at least, the national average was still on the decline Tuesday according to the U.S. Energy Information Administration.

All regions of the U.S. except one showed a decrease of more than 5 cents during the past week, the EIA reported. The Rocky Mountain region saw a smaller decrease of just under 4 cents per gallon. California saw a decrease of 7.5 cents for the week.

Following are the regional averages reported on Tuesday by the EIA:

U.S. – $3.897, down 5.9 cents
East Coast – $3.940, down 5.9 cents
New England – $4.072, down 5.8 cents
Central Atlantic – $4.023, down 5.6 cents
Lower Atlantic – $3.854, down 6.2 cents
Midwest – $3.795, down 5.9 cents
Gulf Coast – $3.802, down 5.9 cents
Rocky Mountain – $3.948, down 3.9 cents
West Coast – $4.164, down 6.9 cents
West Coast less California – $4.089, down 6.3 cents
California – $4.228, down 7.5 cents

ProMiles reported the daily average for diesel at $3.887 per gallon on Tuesday, down two-tenths of a cent over the weekend.

Oil prices were rebounding on Tuesday but remained close to the seven-month lows seen in the past week. Domestic crude was trading at $91 a barrel in New York while European Brent crude oil was trading at $107. Both types are commonly associated with diesel production.

Kloza predicts those prices will likely inch back to $100 and $120 respectively during the second half of 2012.

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