Diesel prices soften, but watching U.S. infrastructure plan

CNS Canada — Sinking prices for crude oil and a softer Canadian dollar have kept diesel prices relatively low for Canadian farmers in 2017, and they could be heading lower, as long as U.S. President Donald Trump’s infrastructure plan doesn’t get in the way.

“I would probably say in Canada you’re going to see numbers trickle lower here in the next month,” said Tom Kloza of the Oil Price Information Service in New Jersey.

Diesel prices across the Prairies were roughly in the $1 per litre range as of Tuesday.

North America is “sort of scraping bottom” when it comes to prices for oil, gas and diesel, Kloza said, due partly to the mild winter that most of North America experienced.

However, he said, the long-term bias is pointed higher and a few months from now the current values in Western Canada may look cheap.

It’s quite likely farmers will pay more for diesel during harvesting than seeding, he added.

While the Organization of the Petroleum Exporting Countries (OPEC) decided in 2016 to slash oil production, he said, it will be a while until those moves are felt.

“The problem with the OPEC cuts is they only run through the first six months of the year, and there are a lot of things in the second six months of the year that might send prices lower,” he said.

Another factor lurking in the market, this time with the potential to move prices higher, is Trump’s pledge to spend US$1 trillion on U.S. infrastructure.

“Money for infrastructure usually enhances demand for diesel,” he said.

Also, “there is a small chance though that Mr. Trump and the Republican Congress might try to put through an import duty on everything, including oil prices.”

That would have a drastic effect on the market, he said. “That would raise the price of gasoline, diesel and jet fuel by 35 or 40 cents immediately.”

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

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