Source: Freight Waves
March 7, 2022
Waiting for more oil? OPEC’s secretary-general shows no sign the group will add supply
HOUSTON — The benchmark diesel price that the trucking industry uses to set the price of fuel made history Monday as markets went on a wild 24-hour roller coaster.
And at a leading industry meeting in Houston, OPEC’s secretary-general mostly dodged a question of whether OPEC would add more oil to the market.
The Department of Energy/Energy Information Administration weekly retail diesel price rose 74.5 cents per gallon to $4.849 a gallon. It is the highest price in the history of the series, which goes back to the early ’90s. The earlier record high was $4.764 on July 14, 2008.
It was the ninth consecutive week of increases. During that time, the price has increased by $1.236 a gallon.
The increase was by far the largest in the history of the price, which launched in 1994. Prices rose 30.8 and 34.6 cents a gallon in two nonconsecutive weeks in September 2005, on the back of the double whammy of Hurricanes Katrina and Rita. Those previous record increases have been left in the dust.
As the global market continues to shun at least 2 million barrels a day of Russian exports, the scramble is on to find supply elsewhere. At the S&P Global Commodities Insight CERAWeek conference in Houston, held in person for the first time in three years, OPEC Secretary-General Mohammad Sanusi Barkindo of Nigeria dodged a question of whether his organization might put more barrels on the market.
Earlier in a press conference, Barkindo said that “no one country or group has the ability to maintain balance.” He said OPEC is “following these developments continuously” when asked whether the organization might boost supply.
But he never committed to a statement that could be interpreted as “yes” or “no.” “We have to overcome this crisis,” he said. “We are working with other governments to play their own part in bringing the world back on the rails.”
He also said oil is “under siege,” with access to capital increasingly constrained as banks and other financial institutions move away from lending to the oil industry, under a variety of pressures.
Barkindo said oil markets “could be scary going forward.” But he did not want to declare that what is ongoing with the Russian supply shock is the beginning of what he called the “eighth cycle,” after earlier saying in OPEC’s history that dates back to the early ’60s, there had been seven “cycles” of price surges or price collapses.
Ultra low sulfur diesel prices on the CME commodity exchange surged on the open in trading late Sunday afternoon U.S. time, primarily on news that a full embargo on Russian oil was under consideration. At one point soon after the open, ULSD rose to $4.22373 a gallon. If it had settled above $4, it would have been only one of five times in the contract’s history that it had done so, all of them near the all-time high price of $4.11, recorded on July 3, 2008.
But prices fell back from there, settling at $3.9215 a gallon, still a gain of 14.52 cents. ULSD on CME has now added roughly $1.07 a gallon in just six trading sessions.