U.S. inventories of distillate fuels (diesel and heating oil) are nearing a 20-year low while the increased cost of diesel is approaching prices last reached in the aftermath of Russia’s 2022 invasion of Ukraine.
Distillate inventories fell by 2.2 million barrels to 103.4 million for the week ending Aug. 26, according to the U.S. Energy Information Administration.
That figure, which was 14.6% below the five-year seasonal average, was down 5 million barrels over six weeks. East Coast inventories sit at a record seasonal low.
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The decline is all the more striking because inventories are usually growing at this time of year.
But an increase in price this year is what you would expect when supplies are limited and demand remains the same.
This is particularly the case with diesel’s role in agriculture, construction and the transportation of goods within a booming economy.
The $5.60 price of diesel at the end of August was 62% higher than its $3.50 price in early January.
In addition, this latest drop in U.S. stockpiles seems likely to maintain upward pressure on diesel prices as we enter the harvesting and heating season.
The drop in U.S. supplies only adds to the degree of global shortages as the Mideast rebuilds its facilities and supply chain.
