MarketsFarm — Canadian producers may enjoy a lower diesel bill during spring seeding, as reductions in demand have weighed on diesel prices across North America.
Patrick DeHaan, head of petroleum analysis for GasBuddy, said retail diesel prices are down by about 10 to 15 cents per litre since the beginning of the year.
The drop in prices is caused by lower-than-average demand, partially due to milder winter temperatures in regions where diesel is used to heat homes.
However, as with most financial indices, crude oil and diesel prices are largely at the mercy of the rapidly spreading COVID-19 coronavirus. DeHaan expected prices to continue to trend downward in light of reduced demand for diesel, gasoline and jet fuel.
“The overwhelming odds are that diesel prices will continue to move lower in the weeks ahead,” he said.
The Organization of Petroleum Exporting Countries (OPEC) on Thursday proposed production cuts in order to stymie rapidly dropping crude values, which would “trickle down” to raise diesel prices as well. OPEC’s allies rejected the proposal.
However, refineries around the world could choose to cut output rates independent of an industry-wide agreement.
Oil refineries typically perform routine maintenance work on facilities at this time of year, which cause fuel inventories to dip slightly, DeHaan noted. That could cause “a small rally” in diesel prices, but markets are largely in lockstep with COVID-19 headlines.
“Prices are going to be driven by developments, either positive or negative, when it comes to the coronavirus,” he said.
“If the coronavirus simply stopped spreading tomorrow, things would be very different.”
— Marlo Glass reports for MarketsFarm from Winnipeg.