U.S. diesel and gasoline prices hit fresh records this week as oil traded above $100 a barrel, driven by a Saudi pipeline outage and shrinking global inventories. Prices eased slightly on Wednesday after a report that the Saudi pipeline could restart at half capacity within days, but WTI and Brent both remain sharply higher for the week.
U.S. diesel prices hit $6.301 per gallon on Tuesday evening, a record. Gasoline climbed to an average of $4.355 per gallon that same evening, according to GasBuddy data. Oil above $100 a barrel is behind the jump, and industry executives say there is no clear path to lower prices in the short term.
Pipeline outage drains inventories
The shutdown of a key Saudi East-West pipeline, hit by drone attacks last week, forced the kingdom to rely more heavily on the Strait of Hormuz, where tanker traffic already faces disruption from the U.S.-Iran standoff. Global observed oil inventories fell by 95 million barrels in August, bringing cumulative draws since February to 507 million barrels, the IEA said in its September report. Oil on water volumes also dropped as tanker traffic out of the Middle East came under renewed attacks.
Chevron CEO Mike Wirth said market buffers have now been played out. "It's harder to envision a scenario where prices soften and quickly," Wirth said, adding that he sees the risks tilted to the upside over the coming months.
Prices pause as pipeline restart nears
Oil halted its weekly surge on Wednesday after Bloomberg News reported the Saudi pipeline could resume at half capacity within days. Brent crude fell 3.1% to settle at $105.41 a barrel. WTI dipped 3.6% to $102.02 in the same session. Even after the pullback, the two contracts were still up 6.1% and 8.1% for the week, respectively.
U.S. commercial crude inventories excluding the Strategic Petroleum Reserve fell by 700,000 barrels in the week of September 11, the EIA said, a smaller draw than the 1.6 million barrels analysts expected. Total crude and fuel exports reached 12.39 million barrels that week, the highest since early June.
Diesel squeeze threatens broader costs
Diesel is a behind-the-scenes cost for businesses, according to JPMorgan analysts. Diesel powers freight and heavy equipment, so a price jump may raise the cost of making and delivering everyday goods, the analysts said this week. Diesel demand tends to rise in the coming weeks with the harvest, heating and holiday seasons, and GasBuddy's Patrick De Haan said diesel could reach $6.60 a gallon in a few days.
Sources: Oilprice.com, Investing.com
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