Two major diesel fuel retailers have released a joint statement trying to tell the consumer community that everything will be fine.
David Fialkov is Executive Vice President of Government Affairs for both the National Association of Truckstop Owners (NATSO) and the Society of Independent Gasoline Marketers of America (SIGMA). The largest members of SIGMA are typically large independent gas and diesel retailers such as Sheetz or Wawa.
In the statement released on Tuesday, Fialkov tried to reassure that the market is working to ensure supplies.
“Diesel supply is tight and diesel inventories are low,” he said in the prepared statement. “This is a structural issue, but the market is adjusting to get the product where it’s needed as efficiently as possible. Absent a disruptive event, the current period of fragile stability can continue.”
(This author has attended SIGMA annual meetings in the past, and as one of their outside counsel noted more than once at those meetings, their members would list utilities as their first, second, and third most important issues. The member companies, like NATSO, do not Are part of a larger independent oil or refining company and therefore cannot approach a parent company or affiliate.)
Updated inventories figures will be released by the Energy Information Administration on Wednesday. The number that has been the focus of general media attention is “daily coverage,” which fell to less than 26 days last week. This number is found by taking the total inventory and dividing it by the average daily consumption. It indicates how long stocks would last if all US refineries were closed and no imports were brought into the US. That’s not the same as “we’ll run out of diesel in 25 days,” as Day’s cover has been interpreted by many.
S&P Global Commodities Insight’s weekly forecast, released on Tuesday, says inventories of all non-jet distillates, which are between 85% and 90% diesel, will fall by 900,000 barrels in Wednesday’s report. In order to know what this would mean for Days Cover, one needs to know the consumption number or, as the EIA calls it, the product supplied. The combination of inventory number and consumption gives an updated range number.
In the joint statement, Fialkov acknowledged that the amount of diesel in stock is a concern. In particular, the effects of an unforeseen disruption would be exacerbated by the low inventories.
“Low inventories expose us to sudden increases in demand or decreases in supply,” he said in the statement. “For example, if a major refinery closes for a period of time, or if the Northeast becomes unusually cold for the time of year, the cause for concern could increase.”
The NATSO/SIGMA statement said nothing more. But it can be seen as a reaction from this key trade group to market fears that diesel pumps are just weeks away from “phasing out”.
Diesel on the CME commodity exchange retreated on Tuesday. Declined $3.707 a gallon for the day, down 1.04 cents. However, that 0.28% decline was far less than the more than 2% drop in both WTI and the Brent benchmark, suggesting continued strength relative to the broader oil complex of key prices.
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