Soaring Overeseas Inventories and Transition Towards Cleaner Fuel Led Drop in US Diesel Prices

In the USA, Diesel prices have remained weak and witnessed consistent reductions throughout the first quarter of 2023. However, by the quarter ending, Diesel prices decreased by 1.7%, as per the ChemAnalyst Pricing Intelligence, and the Ex-Washington price discussions settled at USD 4.13 per gallon by the month ending in March 2023.

The primary reason is the decline in Diesel fuel consumption as the US refiners change specifications to make cleaner burning transitional. In addition, the warmer weather supported the demand reduction in the domestic as well as in the overseas market. Over the past couple of months, the US suppliers heavily exported Diesel and heating oil to the European market as such that the inventories level in Antwerp (Belgium) and Rotterdam (Netherlands), has surged by 42% since December 2022 to 18.2 Million barrels on March 2023. The data compared to the past five years' traditional trends showcased a significant increase of 7% in comparison on an average basis. 

Consequently, the domestic inventory levels rose, especially after the spring maintenance activities and increased refinery run rates, as many regional refineries went for maintenance activities during spring. While the imports of Crude oil also fell due to a reduction in Russian Crude oil production. At the same time, the strengthening of the US Dollar due to high-interest rates by the federal reserve vanished the oil price gains, and upstream the cost support remained stable.

As per the reports, the upstream Crude oil market is volatile right now, and the oil prices are consistently increasing from the H2 of the month. While the Diesel fuel inventory levels are falling in the region as per the EIA  data, the inventory levels dropped by 13% i.e, 2.8 Million Barrels during Q1 2023.

Analysis suggests, “Consumption of Diesel fuel is likely to surge in power and the rapid turnaround of the logistics, and construction industry in the upcoming quaters. It will raise the demand for Crude oil and distillate Diesel fuel from the North American region. The upstream Crude oil prices will continue to surge as OPEC+ announced production cuts with the beginning of Q2 of 2023 and will begin in May 2023”.