The Department of Energy/Energy Information Administration benchmark diesel price fell for the first time Monday after 12 weeks of increases.
An increase of 3.5 cents/gallon, published Tuesday but effective a day earlier, put the price at $5.608/g. During the run of a dozen increases in the price used for most fuel surcharges, the DOE/EIA price rose $2.184/g.
With retail prices lagging futures prices, it’s difficult to guess what comes next, though a decrease seems more likely.
Ultra low sulfur diesel on the CME settled Tuesday at $3.6243/g. That was down almost 21 cts/g on the day, a decline of 5.47%.
That Tuesday settlement is just over 85 cts/g less than where it settled a week ago, just before the first talk of a ceasefire and peace talks pushed down prices.
Even with the normal retail lag, that sort of decline, barring a big turn upward in price, should result in further declines at the pump.
But on the same day that lower DOE/EIA price appeared, so did the monthly report of the International Energy Agency. The numbers in there were stark as a reminder that short-term declines in price in reaction to headlines are not necessarily indicative of the scope of long-term supply disruptions.
Among the key points in the report:
- Average March global crude output was down 10.1 million barrels/day from February. The IEA reiterated that the current slide in output is “the largest disruption in history.” With the fall in March output, first quarter supply, according to the IEA, was 103.6 million b/d. The full year average for 2025 was 106.2 million b/d.
- The economic impact of the war will result in a global oil demand contraction this year of 80,000 b/d. This is notable for two reasons: first, outside of COVID or possibly the Asian economic crisis of the late 90’s, global oil demand rises every year. An outright decline is extremely rare. The original forecast was an increase of about 700,000 b/d this year. Second, a decline of 80,000 bd is nowhere near adequate to destroy enough demand to balance markets if the constraints to supply continue.
- The IEA estimates that oil moving out of the Persian Gulf through other routes, such as the pipeline that crosses Saudi Arabia to the Red Sea port of Yanbu, are up to 7.2 million b/d from less than 4 million b/d before the war started. But the overall loss in output is 360 million barrels in March and a projected 440 million barrels this month.
- Oil markets were supplied by about 85 million barrels coming out of inventory in March. That is a large amount. Projecting ahead, the IEA looked at the balance between supply and demand going forward, and said it will result in a global “call” on inventories of 6 million b/d, which it said was “untenable.” “This suggests further deliberate demand reduction efforts will rapidly be required to balance the market and avoid even deeper economic damage,” the IEA said.
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