The oil market experienced persistent supply constraints and strengthened demand in September, leading to prices reaching their highest level since November 2022.
As traditional diesel pricing follows a similar trajectory to its underlying benchmark, Brent crude, commercial bulk diesel prices also surged from 122ppl to 130ppl across September, according to Portland Pricing’s index.
OPEC+ majors Russia and Saudi Arabia extended voluntary supply cuts in September, and Russia announced a temporary ban on fuel exports to all countries except four ex-Soviet states. That led the International Energy Agency to forecast a supply deficit in Q4.
The demand outlook improved, with US crude inventories falling to their lowest level of 2023, and China showing signs of economic stability following the government’s introduction of stimulus measures.
The UK economy remained bleak, as data highlighted a 0.5% contraction in July, unemployment that reached 4.3% between May and July, and activity that declined at the sharpest rate since March 2009, excluding pandemic-related disruptions.
GBP depreciated from $1.262 against USD to $1.220 throughout September, its worst monthly performance against the dollar this year. Additionally, consumer price inflation eased to 6.7% in August from 6.8% in July, leading the Bank of England to pause interest rates at 5.25% after 14 consecutive hikes.
Based on current wholesale prices, a c.four-cent decline in GBO equates to a 2ppl increase in the UK diesel price.
The cost to blend biodiesel to the UK B7 specification (7% biodiesel) opened and closed September at 4ppl, thus having minimal impact on the commercial bulk diesel price. Renewable diesel (HVO) prices also increased in September from c.145ppl to 151ppl, the highest level since February.
However, increased commercial bulk diesel prices, combined with Renewable Transport Fuel Certificates declining by less than 1p, has led to a narrowing in the premium of HVO over fossil diesel from 23ppl to 21ppl by month end.
Portland Pricing is a specialist provider of transparent, independent fuel price information, covering both traditional and alternative fuels. For more information, visit its website.