As 2019 got underway, fuel prices started to rebound after rapidly declining during the fourth quarter of 2018.  January prices opened the month at just over $45 per barrel and closed at just under $54, a 16% increase.  The following graph shows the daily price movements over the past three months:

The rebound in prices was primarily caused by the announcement in December from OPEC and Russia that they would reduce production in early 2019 to help support prices.  Shortly after the start of January, Saudi Arabia reported that its recent oil production had fallen below what was anticipated from the production cuts which helped support prices.

In addition to the production cuts, near the end of January, the US implemented economic sanctions against Venezuela in response to the political and economic conflict in that country.  Venezuela’s oil production had deteriorated over the past few years but removing their limited amount of supply provided further support for rising prices.

Due to the way oil prices declined throughout December followed by increases throughout January, the average price for each month was relatively unchanged.  Average wholesale prices for diesel and gas were also relatively unchanged.  However, retail prices for diesel and gas continued falling as they lagged behind wholesale’s decline during the fourth quarter of 2018.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

As retail prices continued decreasing while wholesale prices flattened, retail margins started to decline.  Despite the reduction, retail margins remain at relatively high levels not seen in many years.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

Sokolis Group anticipates oil prices will remain in the low to mid-$50’s for a short period but will likely increase to $60 and beyond by the second half of the year.  The major factors to support rising prices include the production cuts by OPEC and Russia, the recently imposed economic sanctions on Venezuela, the expiration of Iranian sanction waivers, along with the possibility that the US and China may find a way to resolve or scale back their trade war.

In addition, as we previously communicated, IMO 2020 will start putting more upward pressure on prices later in 2019.  As a reminder, this is a new rule that will require ships to start burning cleaner fuel.  The transition from bunker fuel to diesel fuel will increase demand for diesel which is already running at high levels.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

For the third consecutive month, crude oil prices continued their steady decline throughout December.   Prices closed the month at just over $45/barrel which is 14% lower than the start of the month.  Prices have fallen by an extraordinary 40% compared to their recent high of $76 at the beginning of October.  The following graph shows the daily price movements over the past three months:

Reflecting further back, the graph below shows how prices moved over the past two years.  It is interesting to see how prices increased at a modest pace from mid-2017 through the beginning of October 2018, then rapidly collapsed during the remainder of 2018:

Looking back over the extended period, prices started climbing in mid-2017 as OPEC countries, along with Russia, reduced their oil production levels in an effort to support prices.  These production cuts continued through 2018.

During April 2018, higher prices were driven further by tensions in the Middle East as military air strikes were carried out by the US in Syria.  Shortly afterward in May, the US announced it would withdrawal from the Iranian nuclear agreement followed by a reinstatement of economic sanctions later in the year.

As the summer progressed, oil prices fluctuated as the impact of the Iranian sanctions became unclear.  OPEC and Russia disagreed about changing production levels to make up for lost Iranian barrels.  During September, they ultimately agreed to an increase that appeared to be less than what would be needed which drove prices higher.

Shortly after the start of October, the US announced that a handful of nations would be allowed to continue purchasing Iranian oil for a limited time.  The anticipated impact from the loss of Iranian barrels was substantially avoided and led to a decline in prices.

Meanwhile, the ongoing trade war between the US and China continued.  The lack of any substantial progress toward a resolution raised fears of a global economic slowdown.  The result was that global financial markets took a major downturn along with oil prices.  That decline continued through December.

Wholesale prices for diesel and gas also continued to decline with oil during December.  However, retail prices for diesel only fell modestly compared to retail prices for gas.  Diesel demand has continued to be very strong and will likely continue through the winter heating season while demand for gas has been softening.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

As diesel wholesale prices continued decreasing, and at a faster rate than retail, retail margins soared higher.  Gas wholesale prices also declined significantly, but retail prices moved at the same pace which still kept gas margins at a very high level not seen in many years.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

The oil market is always difficult to predict with so many factors to consider along with a few occasional surprises.  2019 is certainly no different and is already starting off with a high level of uncertainty.  However, based on where oil prices currently stand, Sokolis Group believes they don’t have much room to fall further and will more likely begin increasing throughout 2019.

There are several factors that support prices rising; OPEC and Russia already announced in December that they would reduce production in early 2019 to help support prices.  In addition, at the end of December, there was renewed optimism about the US and China making progress to resolve their trade war.

Another factor that may drive prices higher in 2019, particularly the second half, is the implementation of new rules issued by the International Maritime Organization (IMO) that will take effect at the start of 2020.  These new rules will require ships to reduce air pollution by discontinuing the use of relatively dirty bunker fuel or installing costly air scrubbers.  The cheaper option will be to switch fuel and use low-sulfur diesel, the same primary fuel for trucking fleets along with heating oil.

Demand continues to be very strong for diesel fuel and inventories are relatively low.  Although diesel prices have declined recently, they are still at a relatively high level compared to oil.  This is because refining margins along with retail margins have increased with the demand for diesel.  The IMO rules will require more production of diesel fuel which will cause demand for oil to increase.  However, refining resources are already running near capacity and could be strained to meet the demand to produce more diesel.

For all the reasons mentioned above, Sokolis Group anticipates crude oil prices will begin to rebound toward $50/barrel in early 2019, then potentially reach $60 and beyond by the second half of the year.  In addition, there is strong possibility that diesel fuel prices will remain elevated throughout the year compared to the underlying price of oil due to additional demand for this refined product.  Also, keep in mind that if there are any unplanned disruptions to refining capacity, price spikes may be severe.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

The collapse of crude oil prices continued throughout November as they fell 20% compared to the beginning of the month.  November’s closing price of just under $51/barrel is 33% lower than the recent peak of $76/barrel at the beginning of October.  The following graph shows the daily price movements over the past three months:

The increase in prices leading to their peak in early October was primarily driven by concerns about tightening supplies due to the scheduled implementation of economic sanctions on Iran near the start of November.  Despite the anticipated sanctions, prices turned downward in early October as oil inventories started increasing.  In addition, trade disputes and rising interest rates led to pessimism about future global economic activity which caused a significant decline in financial markets.  The potential for an economic slowdown and weakening demand for oil depressed prices further.

As November got underway with Iranian sanctions looming, the United States announced it would grant exemptions to eight countries allowing them to continue purchasing Iranian oil for a limited period without being penalized.  The primary reason for granting these exemptions was to prevent the price of oil from rising again.  This move significantly lowered concerns about supplies tightening and oil prices continued dropping through the end of the month.

Wholesale prices for diesel and gas followed oil’s decline during November.  However, retail prices for diesel only fell modestly compared to retail prices for gas.  Diesel demand has continued to be very strong and will likely continue through the winter heating season while demand for gas has been softening.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

As wholesale prices decreased significantly, and at a faster rate than retail (which is not unusual during these market conditions), retail margins spiked higher.  In fact, diesel margins reached their highest level since the beginning of 2016.  Gas margins also rose to levels not seen in many years.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

At the start of December, the United States and China announced a truce in their trade war so markets may become more optimistic about a resolution in the future.  In addition, an OPEC meeting is scheduled for early December and it is widely anticipated they will decide to cut production levels in an effort to balance the market and provide support for oil prices.  Russia has also indicated they will support production cuts while Canada has recently taken steps to limit their production too.  For all of these reasons, Sokolis Group anticipates crude oil prices will begin to rebound toward $60/barrel and beyond as the end of the year approaches and we look toward 2019.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Crude oil prices tumbled by almost 13% during October.  They peaked very early in the month at just over $76/barrel and proceeded to fall throughout the month to close at just over $65.  The following graph shows the daily price movements over the past three months:

The rapid decline of oil prices in October followed a rapid increase during the second half of September.  During that prior period, prices were driven higher by concerns about tightening supplies resulting from economic sanctions on Iran.  During the first few days of October, Middle Eastern concerns increased further after the murder of Saudi Arabian journalist, Jamal Khashoggi, in the Saudi consulate in Istanbul.

As October progressed, oil prices took a downward turn.  Tensions related to the Saudi murder continued but the anticipated impact on future oil supplies appeared to subside.  While that helped trim prices, additional headwinds were encountered as oil inventory levels began growing again.  Furthermore, the biggest blow to oil prices resulted from a significant decline in global financial markets.  Fears of slowing global economic growth for a variety of reasons translated to lower anticipated demand for oil in the future.

Due to the way oil prices increased during September followed by the decrease in October, the average price for each month was relatively consistent.  However, average wholesale and retail prices for diesel continued rising during October due to continued strong demand.  Meanwhile, wholesale gas prices began to decline as demand slowed after the summer driving season while retail gas prices lagged.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

As wholesale and retail prices for diesel prices increased at a similar rate, diesel margins remained steady.  However, gas margins increased sharply as retail merchants seized the opportunity to maximize their margins as wholesale prices declined.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

Sokolis Group anticipates crude oil prices will rebound slightly higher toward $70/barrel and trade in that range for the foreseeable future as the heating oil season gets underway.  However, there is still a significant possibility that prices could increase sharply over the next few months if inventory levels begin to decline again or Middle Eastern political and economic conditions worsen.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Crude oil prices traded in a narrow range near $70/barrel for most of September then started rising quickly toward the end of the month.  Prices closed the month at just over $73.  The following graph shows the daily price movements over the past three months:

For most of September, prices were relatively steady in the absence of any significant political or economic developments.  During the last half of the month, concerns began to grow about tightening supplies due to economic sanctions on Iran.  OPEC and other oil producing countries met toward the end of September and indicated they did not plan to increase production further to make up for lost Iranian gallons.  As a result, oil prices began increasing through the remainder of the month.

Because of the increase in oil prices during September, wholesale prices for refined products also increased although retail prices for diesel only increased slightly while gas remained unchanged.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Since wholesale prices for refined products rose slightly faster than retail during September, retail margins declined modestly compared to the prior month.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

Sokolis Group anticipates crude oil prices will continue to trade in the low- to mid-$70’s for the foreseeable future.  However, there is still a significant possibility that prices could increase sharply over the next few months if supplies from the Middle East continue to tighten due to sanctions on Iran.

In addition, as we mentioned last month, more upward pressure on prices is expected over the next year and beyond due to new rules that will be put in place requiring large shipping vessels to start using low sulfur diesel by 2020.  Assuming no other significant changes in the market, those rules will cause demand for oil to increase significantly to produce the additional low sulfur diesel needed for ships.  Furthermore, refining capacity may not be able to expand fast enough to meet the additional demand for low sulfur diesel.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

During August, crude oil prices started the month near $70/barrel but fell toward $65 by the middle of the month.  Prices began rising again during the last half of the month and closed near $70 again.  The following graph shows the daily price movements over the past three months:

The price decline during the first half of August was mainly due to concerns that economic growth and future demand for oil could be curtailed by the ongoing trade war between the US and China.  In addition, economic sanctions on Iran started to be implemented but did not result in any military response previously threatened by Iran.  As tensions in the Middle East appeared to settle to some extent, upward pressure on oil prices was relieved.

The increase in prices during the second half of August was partially driven by plans for the US and China to resume their trade negotiations.  Although those discussions did not result in any breakthroughs, optimism remained for progress during future talks.  In addition, prices were driven higher by new reports of strong demand and inventory levels continuing to decline.

Due to the way oil prices declined during the first half of August followed by an increase during the second half, the average price for the month reflected only a slight decline compared to July.   Meanwhile, wholesale prices for refined products were relatively unchanged while retail showed slight declines.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Since wholesale prices for refined products remained relatively steady from July to August while retail prices declined slightly, retail margins did not change significantly.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

Sokolis Group anticipates crude oil prices will continue to fluctuate near $70 for the foreseeable future.  However, there is still a significant possibility that prices could increase sharply over the next few months if supplies from the Middle East continue to tighten due to sanction on Iran and oil inventories decline further.

Looking further toward 2019 and beyond, additional upward pressure on prices is expected because of new rules by the International Maritime Organization (IMO) regarding the type of fuel that large shipping vessels are required to use.  Currently, they use something referred to as bunker fuel which is practically a by-product from the oil refining process.  The IMO’s new rules will require ships to use low sulfur diesel to reduce air pollution which is similar to what happened to trucking fleets in the US a number of years ago.

Assuming no other significant changes in the market, the IMO rules will cause demand for oil to increase significantly by 2020 because many more barrels of oil will be needed to produce additional low sulfur diesel.  In addition, refining capacity, which is already running near peak levels, may struggle to meet the additional demand for low sulfur diesel.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Crude oil prices opened July slightly over $74/barrel following a rapid increase after OPEC’s meeting near the end of June.  Prices held steady near $74 for the first 10 days of July but fell back and traded near $70/barrel for the remainder of the month.  The following graph shows the daily price movements over the past three months:

The rapid price increase following the OPEC meeting in June was primarily attributable to concerns that their agreed upon production increase would not be enough to offset declines caused by economic sanctions on Iran, political turmoil in Libya and Venezuela, and a production outage in Canada.  Overall support for rising prices also continues to be driven by strong global demand while inventory levels have declined.

As the middle of July approached, oil prices declined quickly for several reasons; a significant production increase was reported by Saudi Arabia, Libyan rebels allowed production to resume in some areas, waivers to allow some purchases of Iranian oil were being considered by the US, and the Canadian outage was projected to be resolved by August.

Despite the rapid price increase near the end of June, the decline by mid-July caused the average price of oil for July to only be slightly higher than June.  The average monthly wholesale prices for diesel and gas also barely changed while retail prices declined slightly.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Since average wholesale prices for refined products remained steady from June to July while retail prices declined slightly, retail margins also declined slightly.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

Sokolis Group anticipates crude oil prices will continue to fluctuate near $70 for the foreseeable future but the possibility of prices rising quickly again remains strong due to significant concerns about supply disruptions from the Middle East.  A primary factor is the implementation of economic sanctions against Iran that are scheduled to take effect in early August.  Those concerns are compounded by recent attacks on Saudi Arabian oil vessels by Iranian-backed Houthis rebels based in Yemen.  As a result, Saudi Arabia suspended oil shipments through the Red Sea’s Bab al-Mandeb strait.

Iran has also made retaliatory threats in response to the sanctions which include blocking the Strait of Hormuz, a major shipping channel in the Persian Gulf, where almost a third of global oil supplies must navigate.  While this tactic is considered extremely risky for Iran, any attempt to block the Strait would likely be met with military action by the US directly and/or US-backed Middle East allies, including Saudi Arabia. If a military conflict does occur in the region, the likely result would be a rapid spike in oil prices.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Crude oil prices traded in a narrow range near $65/barrel for most of June leading up to the OPEC meeting on June 22^nd. After the meeting, prices quickly rose by over 10% during the last week of June and closed the month at $74.25.  The following graph shows the daily price movements over the past three months:

Continue reading Fuel Flash – July 2018 →

Crude oil prices continued climbing throughout May and then lost momentum near the end of the month.  Despite the setback, prices are still roughly 40% higher compared to a year ago.  The following graph shows the daily price movements over the past three months:

Continue reading Fuel Flash – June 2018 →

Crude oil prices rose rapidly during April, gaining approximately 10% from where they started the month.  Prices are about 30% higher than a year ago and have now reached levels not seen since November 2014.  The following graph shows the daily price movements over the past three months:

Continue reading Fuel Flash – May 2018 →