Fuel prices have been a bit less volatile this week compared to recent trading. Diesel prices stayed within a 5-cent band and gasoline “only” swung 10 cents this week. But the relative calm at the NYMEX level masks some big swings in local prices.
California’s gasoline prices have exploded this week, rising to almost $1.20 above NYMEX RBOB prices. Because California’s fuel infrastructure is mostly cut off from the rest of the country, local challenges can be particularly acute. The recent heatwave has impacted refinery operations, with local refineries running below 85% of their capacity since June (though this past week did see slightly higher numbers). The region has seen basis, the difference between local prices and the NYMEX, surpass $1/gal before, but it’s only occurred three times in the past decade.
Although some regions have seen explosive prices, the general trend recently has been lower. WTI crude hit a low of $81/bbl this week, the lowest closing price since before the Russia-Ukraine conflict. Gasoline and diesel prices have also fallen a long way from recent highs. Concerns of a recession, mixed with Chinese COVID lockdowns and rumors of a US-Iran nuclear deal, have kept markets subdued.
To counter the bullish sentiment, OPEC+ agreed this week to cut supply slightly, showing that they’re taking an active role in managing prices. Analysts quickly noted OPEC’s decision to defend higher prices, noting that it could form a floor for oil prices. However, after years of production cuts and lost market share, it’s unclear how willing OPEC will be to continue supporting oil markets.
Prices in Review
Crude oil opened the week at $86.64 on Tuesday, following a long holiday weekend in the US and Canada. On the heels of OPEC’s decision to cut quotas, the market moved higher. Economic weakness changed the narrative on Wednesday, sending prices to their lowest closing price since January. The market found its footing again on Thursday, then sank again on Friday morning. Prices opened Friday at $82.80, a loss of $4/bbl (-4.7%).
Diesel prices got a lift on Monday while the US and Canadian markets were closed, but
on Tuesday prices opened at just $3.5825. That price level held mostly steady through the week, with no major change in direction on Wednesday or Thursday. By Friday, prices had fallen to an opening price of $3.5366, down 4.5 cents (-1.3%).
Like diesel, gasoline markets saw heavy holiday trading but opened at a weak $2.4425 on Tuesday. Prices tumbled along with crude oil prices as economic concerns loomed and stayed low throughout the remainder of the week. On Friday, gasoline opened at $2.3280, down 11.5 cents (-4.7%) from Monday’s opening price. Later trading on Friday sent prices closer to their opening price, undoing losses for the week.