US Diesel Futures and Crude Oil Move Together
January 2017 NY Harbor ULSD futures fell 1.2% and settled at $1.64 per gallon on December 14, 2016. Diesel futures fell despite the unexpected decline in distillate inventories.
Bearish momentum in crude oil (BNO) (PXI) (USL) (ERX) prices pressured diesel prices. For more on crude oil prices, read How Cushing Inventories and OPEC Are Pressuring Crude Prices.
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US on-highway diesel fuel prices
The EIA (U.S. Energy Information Administration) reported that US on-highway diesel fuel prices rose 0.5% to $2.49 per gallon for the week ending December 9, 2016—compared to the previous week. So far, it’s the highest level in 2016. Likewise, US residential heating oil prices rose 1.6% to $2.53 per gallon for the same period.
Heating oil and diesel fuel price forecasts for 2016
The EIA reported that heating oil prices could average $2.12 per gallon in 2016 and $2.62 per gallon in 2017. Heating oil prices averaged $2.65 per gallon in 2015. On-highway diesel fuel prices will likely average $2.31 per gallon in 2016 and $2.70 per gallon in 2017. Diesel fuel prices averaged $2.71 per gallon in 2015.
US distillate inventories drive heating oil and diesel fuel prices. Distillates consist of diesel fuel and heating oil. Please read the last part of this series to learn more about US distillate inventories.
Impact on energy stocks and ETFs
Lower gasoline, diesel fuel, and crude oil prices could have a negative impact on US refiners and oil producers such as Valero Energy (VLO), Comstock Resources (CRK), Northern Oil & Gas (NOG), Northern Tier Energy (NTI), Swift Energy (SFY), QEP Resources (QEP), and Western Refining (WNR).
Volatility in crude oil and gasoline prices also impacts ETFs and ETNs such as the iShares Global Energy ETF (IXC), the First Trust Energy AlphaDEX Fund (FXN), the Fidelity MSCI Energy (FENY), the DB Crude Oil Double Short ETN (DTO), the iShares U.S. Oil Equipment & Services ETF (IEZ), the United States Gasoline Fund (UGA), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).
In the next part of this series, we’ll take a look at US distillate inventories.