Diesel surging on cold weather, more increases in DOE/EIA benchmark loom

Core Insights - The oil market has shifted from being favorable for consumers to presenting significant challenges, with ultra low sulfur diesel (ULSD) futures prices reaching their second-highest level in nearly two years [1] Price Trends - The average weekly retail diesel price rose for the second consecutive week, increasing by 9.4 cents per gallon to $3.624 per gallon, following a prior week's increase of 7.1 cents per gallon, marking a total rise of 16.5 cents per gallon after eight weeks of decline [2] - The current price of ULSD is still below the recent high of $3.868 per gallon recorded on November 17, but the recent gains suggest that next week's prices will likely be higher [3] Market Dynamics - The price of ULSD has been driven up by cold weather and the structural similarities between ULSD and heating oil, with ULSD settling at $2.6462 per gallon, an increase of 7.82 cents per gallon, and a total rise of 27.94 cents per gallon over the last three trading days [4] - The Tuesday settlement of ULSD was the second highest since April 2024, only surpassed by $2.7011 per gallon on November 18 [5] Comparative Analysis - The current cold snap is causing diesel prices to rise at a faster rate than crude oil, with the spread between Brent crude and ULSD reaching approximately $1.04 per gallon, up from 67 cents per gallon at the beginning of the year [6] - U.S. diesel prices have reached a premium over similar products in Europe, translating to about 40 cents per gallon, the widest margin in approximately three years [7] Operational Challenges - Cold weather has led to operational issues at several U.S. refineries, with reports indicating that more than half a dozen refineries are experiencing problems, many attributed to the cold conditions [8]