CNS Canada — Canadian diesel prices appear to be settling in for a relatively uneventful autumn, according to an industry watcher.
“Unless we get a vortex kind of winter, when a lot of diesel is used for heating purposes, I think it’s another cheap autumn-winter scenario shaping up,” said Tom Kloza of the Oil Price Information Service’s office in New Jersey.
According to GasBuddy.com, diesel prices across the Prairies vary slightly, with drivers in Alberta paying roughly 86-88 cents per litre, while across the border in Saskatchewan they’re paying 95-97 cents. Manitoba came in toward the top end, with motorists looking at average prices of 96 cents, as of Tuesday.
High inventories are one reason for the decrease in diesel prices, along with continued softness in the crude oil market.
“Diesel prices are very palatable right now and below where they were last year by a considerable amount,” Kloza said.
Prices for crude oil are currently hanging just under the US$45 dollar a barrel mark, the threshold at which shale gas wells in the U.S. find it economically viable to operate.
That trend should help keep diesel right where it is, Kloza said.
“It’s difficult to find any people who are calling for a spike in crude oil prices in the next 10 months,” he said.
The lowest projections, he said, call for diesel to head lower for a brief “cup of coffee” in the US$30-$40 a barrel range, or possibly jump to temporary highs of US$50 or US$55 a barrel.
One cautionary note he put forward, however, is that the diesel market likes to pursue extreme swings.
“Diesel is prone to momentum traders. Most of the business is done by machines,” he said.
On a wholesale level, the diesel market was somewhat tumultuous during August, which makes the calmness in the retail market all the more notable.
“August was tri-polar. Crude oil, gas and diesel started all in a bear market. Then it went to a bull market and ended on a bearish note,” he said.
Still, with some analysts calling for the La Nina weather phenomenon to keep temperatures mild at the beginning of winter, he expected the softness in the diesel market to hang firm for the next few months.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.