Fuel Flash – May 2019

During the first half of April 2019, oil prices traded in a narrow range in the low $60’s per barrel, then started rising to a recent high just over $66 on April 23rd but fell below $64 by the end of the month.  Prices increased by almost 6% during April and are up by 37% since the start of the year.  The following graph shows the daily price movements over the past three months:

The increase during the third week of April was primarily driven by the US’s announcement that it would not extend the waivers it had previously granted to eight countries purchasing Iranian oil.  Although Iran’s contribution to global oil supply had already been significantly curtailed, the expiration of waivers could potentially tighten the market even further.  Oil has been rising since the beginning of the year as a result of OPEC and Russia operating at reduced production levels in their effort to balance the market and support prices.  The expiration of Iranian waivers heightened concerns about diminishing supplies.  However, toward the end of the month, prices retreated as OPEC members indicated they would increase production to offset the loss of Iranian supply.

As oil prices increased overall during April, average wholesale and retail prices for diesel grew at a similar pace.  However, wholesale and retail prices for gas increased faster.  Demand for gas has been growing which is typical during this time of year as driving increases when the weather gets warmer.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:  

Due to the way diesel wholesale and retail prices moved in sync during April, average retail margins only declined slightly. For gas, margins rebounded from their very low point last month and are approaching a more typical level.  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-$60’s per barrel for the next month or two but further increases are very likely during the second half of the year.  As we’ve previously indicated, many factors continue to support rising prices.  These include production cuts by OPEC and Russia, economic sanctions on Iran and Venezuela, a potential trade agreement between the US and China, along with IMO 2020 requiring ships to burn cleaner fuel. 

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.