Week in Review – September 16, 2022

It’s been a mixed week for oil prices, with prices rising early in the week for gasoline and crude oil but falling on Thursday. Diesel, on the other hand, fell during each trading session this week. As we covered yesterday, China is considering a move to increase their diesel exports, which would help curb market tightness and bring prices lower. Diesel prices reflect the improvement; the price has fallen over 35 cents since Monday. Of course, price volatility has been a constant, and China’s move isn’t official, so there’s no way to know whether prices will pop back up next week.

Markets breathed a sigh of relief yesterday when rail companies reached a deal with labor unions to avert a strike that would have idled 7,000 trains and cost the US economy $2 billion per day. Although the strike was not particularly impactful for fuel supplies, it would have severely hampered the distribution of renewable fuels and diesel exhaust fluids. The new arrangements grant workers increased pay, including immediate backpay from 2020, and additional time off. Although the unions must still ratify these agreements, it seems a crisis has been avoided.

On the more bullish front, Iran nuclear negotiations seem to be dead in the water. US and European officials have reported that progress is fading after Iran’s recent proposal. Although many had hoped that Iran’s oil supply could help alleviate tight markets, both sides appear too far apart to get a deal done in the near future. With US crude supply also struggling to grow, it’s unclear where the world will find more crude to offset what’s lost when Russian embargos take hold.

Prices in Review

Crude oil prices began the week at $86.25, in line with last Friday’s closing level. Throughout the week, crude creeped higher, with the risk of a rail strike looming. As negotiations ended successfully, the market dropped quickly, falling from a high just shy of $90/bbl back to $85. Prices have stayed in that area Friday morning, with crude oil opening at $85.16, a loss of $1.09 (-1.3%).

Unlike crude oil, diesel prices fell steadily throughout the week as markets priced in more Chinese diesel exports. Opening at $3.57 on Monday, prices climbed slightly higher Monday afternoon to close at $3.60. After that, though, the prices moved downhill. After six cent losses Tuesday and Wednesday and a hefty 17 cent drop on Thursday, prices are down substantially. Diesel opened Friday at $3.2096, a loss of 36 cents (-10.2%).

Gasoline prices followed crude’s trend throughout the week, with prices rising early on before a sharp sell-off on Thursday. Gasoline opened at $2.4223 and climbed to around $2.55 on Wednesday before turning lower. Thursday brought a 10-cent dip, and on Friday the product opened at $2.4328 – a modest penny increase (+0.4%).