Category Archives: fuel

Fuel Flash – December 2018

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:FF1812101

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:

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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:

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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. 

Fuel Flash – November 2018

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:FF181101

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:

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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:FF181104

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. 

Fuel Flash – October 2018

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:

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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:

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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:

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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. 

Fuel Flash – September 2018

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:FF180901

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:

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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:

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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. 

Fuel Flash – August 2018

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:

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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:

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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:

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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. 

Fuel Flash – July 2018

Crude oil prices traded in a narrow range near $65/barrel for most of June leading up to the OPEC meeting on June 22nd. 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:

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Continue reading Fuel Flash – July 2018

Fuel Flash – April 2018

During March 2018, crude oil prices traded in a narrow range for most of the month, then started to climb modestly toward the end of the month.  By the end of March, prices gained about 6% from where they started the month.  The following graph shows the daily price movements over the past three months: 

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Continue reading Fuel Flash – April 2018

Fuel Flash – March 2018

During February 2018, crude oil prices went on a roller coaster ride following a similar track as the stock market.  Shortly after the start of the month, prices fell by approximately 10%.  Prices remained at that lower level for a brief period and then started to rise again.  By the end of February, prices netted to be about 10% lower than where they started the month.  The following graph shows the daily price movements over the past three months: 

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Continue reading Fuel Flash – March 2018