CNS Canada — Canadian diesel prices should go down between now and the end of the summer, according to a fuel expert.
Since early May, the price of diesel across the Prairies has largely been in and around the 94-98 cents per litre range.
Tom Kloza of the Oil Price Information Service reported prices on Monday in the U.S. fell 12-13 cents per gallon in futures trading.
“It was one of those days where it didn’t matter if it was crude or diesel. You had a loss of about seven and a half per cent, that’s a big move.”
Up to that point, he said, North American diesel had been locked in a tight trading range for a considerable period.
“The rest of the world started devaluing oil on Friday (July 3) and that continued today. It’s a pretty sharp downdraft,” he said.
While Kloza said he believes relief at the diesel pump should be felt soon, he cautions it’s impossible to know how long it may take.
“It’s a bit of the rocket and feather, where it rockets higher but trips like a feather lower. But between now and the end of August there’s nothing to stop the erosion of the price of diesel fuel.”
One factor helping to soften the price is the emergence of several new world-class oil refineries opening up in several different countries.
“These refineries have been geared to creating as much diesel as they could possibly make,” he said.
While crude oil is currently buffeted by a number of factors including the Greek debt crisis, the Iran nuclear deal and the slumping Chinese economy, Kloza said diesel should be relatively unaffected for now.
“I think any additional crude oil exports from Iran (as a result of a successful nuclear deal) are a 2016 event. I also have to tell you that everything else from the last week or so is pretty bearish for the petroleum pricing structure.”
Once we get deeper into the fall, though, Kloza said he expects diesel prices to feel the pinch of heavier demand.
“Once we get closer to winter the diesel market should recover and harvest demand will help. But between now and 30 days before harvest time, you just can’t find a catalyst to move prices higher,” he said.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.