As the benchmark diesel price used for most fuel surcharges moved higher this week after eight consecutive declines, the bearish case for further declines in overall prices continues to sign on more followers.

The Department of Energy/Energy Information Administration weekly average retail diesel price, delayed a day due to the Juneteenth holiday, rose 2.1 cents a gallon to $3.815. That ended a streak that took the weekly price down 32.2 cents a gallon from $4.116 on April 17, which was the most recent time that the number posted an increase.

Although there is always a lag between changes in future and wholesale prices on the one hand and retail levels on the other, the increase from Tuesday followed fairly rapidly the first significant week-to-week increase in the ultra low sulfur diesel futures market on the CME commodity exchange in three weeks.

ULSD on CME settled June 12 at $2.3091 a gallon, near the low end of a three-week trading range that saw the price of ULSD close each week at about $2.36. But by the end of last week, it had climbed to a Friday settlement of $2.5514 a gallon, though admittedly on the back of little news that would suggest a bullish market.

However, some of those gains were reversed in trading Tuesday. ULSD fell to $2.4765, reversing most of Friday’s gains, though with the price still above the range that had prevailed for several weeks. There was no CME settlement price Monday, also due to the holiday.

Most of the news in the larger oil markets has been bearish, and that helped propel a decline in crude prices Monday as well. Global crude benchmark Brent dropped 93 cents a barrel to $75.90 but is still well above a recent low of $71.84 from last Monday. U.S. crude benchmark West Texas Intermediate was down $1.28 to $70.50 a barrel.

News reports and tweets from energy-focused journalists laid out the case for why markets have been sagging:

• Bloomberg reported that while supplies of Russian oil have moved lower — as they were supposed to following the imposition of a May 1 cut in supplies from the OPEC and non-OPEC nations lumped together under the OPEC+ banner — they were still above shipments from February. That month is the baseline for the cuts to be imposed against, Bloomberg said. Exports are down 212,000 barrels a day from a May 21 peak but are 250,000 barrels a day more than they were for most of February, according to Bloomberg.
• Reuters energy correspondent Javier Blas said Chinese data showed that in May the country imported 1.4 million barrels a day of Malaysian oil, a virtual impossibility given that total Malaysian output is about 400,000 barrels a day. Blas, in a tweet, said Iranian oil, theoretically under sanctions, was likely being disguised as Malaysian oil. He also said Iranian oil is at a four-and-a-half-year high, and exports recently hit a five-year high. 

The more bullish arguments can be seen in part in the most recent survey of OPEC and non-OPEC production published by S&P Global Commodity Insights. It showed that in May, the first month when the 1 million-barrel-a-day cut was to come into play, production for the entire group was actually down only 660,000 barrels per day from April. 

Peter Sutherland, who describes himself as an energy investor on Twitter, laid out the bullish case, noting that supply will “drop fast as OPEC cuts hit.” He also noted that releases from the Strategic Petroleum Reserve, which were planned as part of legislation from several years ago and are not the same as the now-completed releases implemented by the Biden administration, will come to an end.

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