Dwindling diesel supplies could boost price

CNS Canada — Strong global demand and a looming North American harvest could send diesel prices higher in coming months.

According to one energy analyst in Chicago, farmers may want to buy some fuel before prices get too high.

“We’re telling our people to hedge some of your exposure, because we do think that, barring a big slowdown in the global economy, there is significant upside risk here,” said Phil Flynn of The Price Futures Group.

Supplies of diesel are currently below the five-year average and a crunch could be felt by the end of the year, he noted.

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On Nov. 4, the U.S. is expected to halt imports of Iranian oil after U.S. President Donald Trump withdrew the country from the Iranian nuclear deal.

“We think that we could easily see the price of diesel put on another 10 to 15 cents a gallon to the upside in the next couple of months pretty easily,” he explained.

Prices for diesel across the Prairies were generally in the $1.21-$1.25 per litre range as of Wednesday. The recent rise in crude oil prices has provided some upward momentum for the market. Back in early September, prices were in a range of 95-99 cents in Western Canada.

Canadian diesel prices don’t tend to move in lockstep with their American cousins, but eventually follow the direction of the U.S. market.

One thing that could help the price stay in check, Flynn said, is if U.S. heating oil usage went down. An economic slowdown could also keep diesel prices from spiking.

“If the economy slowed down there is a potential for a squeeze play,” he said. “But I think we’re still closer to the low end of the trading range than the higher end.”

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

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