Diesel prices seen staying low until July

CNS Canada –– The price of diesel has fallen to the same level as gasoline across Western Canada, but a Chicago-based analyst doesn’t expect it to stay that way for too long.

“Probably after the Fourth of July, late July and August the prices may start to edge up,” said Phil Flynn, energy market analyst for Price Futures Group in Chicago.

Diesel was as much as 20 cents per litre more expensive than gasoline across Western Canada for much of 2015 before the prices began coalescing in May. As of Wednesday, the cost of gas and diesel in Calgary, Winnipeg and Regina was virtually the same.

Large inventories of oil in the U.S. are the reason behind the plunge in diesel prices, Flynn said.

“There’s a lot of supply right now, which is keeping the prices down and competitive,” he said, adding gasoline is also more sensitive to fluctuations in the cost of crude oil than diesel.

The speed of planting in the U.S. has also been a factor, he said, as there are more leftover diesel supplies now than were originally projected for this time of year.

“You didn’t have to rebuild inventories like you did for gasoline, and with lots of supplies of diesel, that’s why the spread is out of whack.”

Flynn said he expects a similar price structure to occur during next year’s planting season, but it’s impossible to know for sure.

This type of plunge is the first one that’s occurred since North America switched to ultra-low-sulphur diesel in 2007, he noted. The fuel strain requires heavier processing, is costlier and also slightly less fuel efficient.

“This year, I would enjoy it (the price drop) while you can.”

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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