Diesel Prices Collapse, Then Rebound: What’s Driving Volatility?

The diesel market is experiencing extreme volatility, dropping sharply then rebounding on geopolitical news. With inventories critically low and refining capacity still a concern, experts warn of potential price spikes. Get the latest on heating oil demand and the factors keeping the market on a knife edge.

Ultra-low sulfur diesel on the CME exchange plunged 25.45 cents per gallon on the December contract in a single session after loose talk of U.S.-Iran peace discussions circulated on social media, only to rebound 10 to 11 cents the following day when Iranian officials said no agreement was any closer. The weekly Department of Energy benchmark, published the morning of the interview, showed a more modest decline of $0.06 to $6.292 per gallon — but the intraday futures swings told a more dramatic story about market fragility.

The volatility matters to carriers, brokers, and shippers because it reflects structural tightness that analysts say will outlast any diplomatic development. Roughly 10 million barrels per day of global refining capacity has been knocked offline by attacks in the Middle East and Ukraine, and U.S. and international distillate inventories remain at extremely low levels heading into heating-oil season.

“The market is absolutely going to go down” if a genuine easing of conflict materializes, said John Kingston, who covers fuel markets. But he cautioned that any relief would likely be short-lived: “That doesn’t take away from the fact that longer term, after that kind of almost sugar high has worn off, you have inventories to refill. You have facilities that have to be rebuilt.”

This story was originally published by FreightWaves. Read the full story at FreightWaves →