Diesel Benchmark Climbs Again as Market Remains Steady

The diesel benchmark price has continued its upward trajectory, rising by 4.1 cents per gallon to reach $3.602 as of Monday, February 25, 2025. This marks the third consecutive week of increases, with the price now at its highest level since October 2024. The steady climb in diesel prices can be attributed to several factors, including the impact of new sanctions on Russian oil exports, cold weather driving up demand for heating oil, and ongoing geopolitical tensions.



The recent sanctions imposed by the Biden administration and the United Kingdom on Russian shipping of oil have sent the settlement price of ultra-low sulfur diesel (ULSD) on the CME commodity exchange to a high of $2.621 a gallon on January 17, 2025. Although prices have since drifted down to a settlement of $2.4358 on Monday, February 24, the impact of these sanctions on global oil supply has contributed to the upward pressure on diesel prices.

In addition to the sanctions, cold weather has played a significant role in the increase in diesel prices. As diesel is a distillate like heating oil, cold weather typically drives up demand for heating oil, which in turn affects diesel prices. The recent winter has been particularly cold, with diesel prices rising faster than crude oil prices. A comparison of the front-month spread between ULSD and the global crude benchmark Brent shows that the spread has widened considerably in recent weeks, coinciding with the cold winter.



Geopolitical tensions, such as the ongoing conflict in Ukraine and the Israeli-Gaza war, have also contributed to market uncertainty and increased the risk premium, driving up diesel prices. Ongoing challenges along the Suez Canal, a major shipping route for refined petroleum products, have further increased freight costs across all classes, impacting products such as gasoil, naphtha, and ATK (Jet Fuel).

While the sustainability of the recent diesel price increases remains uncertain, it is likely that prices will remain volatile in the near term due to the ongoing geopolitical tensions and the potential for further supply disruptions. However, the adoption of renewable energy sources and alternative fuels may help mitigate the demand for diesel in the long term, reducing the impact of geopolitical tensions and supply chain disruptions on the diesel market.



In conclusion, the diesel benchmark price has continued its upward trajectory, driven by factors such as new sanctions on Russian oil exports, cold weather, and geopolitical tensions. While the sustainability of this trend remains uncertain, the adoption of renewable energy sources and alternative fuels may help mitigate the demand for diesel in the long term, reducing the impact of geopolitical tensions and supply chain disruptions on the diesel market.