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Crude Prices, Refined Products See Mid-May Gains

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Part 5
Crude Prices, Refined Products See Mid-May Gains PART 5 OF 6

Diesel Prices Continue Month-Long Uptrend in Mid-May

Diesel prices

US on-highway diesel fuel prices this Monday, May 18, averaged $2.904 per gallon. This represents an increase of ~1% from the previous Monday’s $2.878 per gallon. Nevertheless, it’s still 26% lower from diesel prices a year ago.

The EIA (U.S. Energy Information Administration) releases diesel fuel price updates every Monday. These prices are national averages calculated by the EIA.

Diesel Prices Continue Month-Long Uptrend in Mid-May

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Higher diesel prices are positive for refiners such as Phillips 66 (PSX) and Marathon Petroleum (MPC), which produce diesel from crude oil. Combined, these companies make up 2.6% of the iShares Global Energy ETF (IXC).

Stronger diesel prices are also positive for refining MLPs such as Northern Tier Energy (NTI) and Calumet Specialty Products Partners (CLMT).

Diesel prices are affected by distillate inventory levels, which are in turn determined by supply and demand trends. For more on this topic, read What Last Week’s Distillate Inventories Mean for Refiners.

Diesel price forecasts

According to the EIA’s “Short-Term Energy Outlook” released on May 12, diesel fuel retail prices should average $2.88 per gallon in 2015, and then rise to $3.12 per gallon in 2016. Prices averaged $3.83 per gallon in 2014.

The EIA’s “Annual Energy Outlook for 2015,” released on April 14, says “the effect of rising crude oil prices on distillate fuel use in the United States is less than for motor gasoline, because of a greater increase in distillate fuel demand as freight requirements continue to grow and the mix of light-duty vehicle fuels shifts from gasoline to diesel fuel.”

A sustained rise in diesel prices would negatively impact drivers and freight operations alike. This would be negative for the economy (SPY).

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