During May, crude oil prices increased again for the third straight month and briefly spiked above the $50/barrel mark. May’s closing price of just over $49 is approximately 33% higher than where it ended 2015. Even more notable is that May’s closing price was almost double compared to mid-February’s $26 which was the lowest point of the year.
The continued increases have been supported by a number of factors on both sides of the supply and demand equation. Two prominent supply disruptions in May were related to the devastating wildfire in Canada along with Nigeria’s deteriorating financial and political conditions. Meanwhile, demand for refined products has been growing along with the level of optimism that it will continue increasing. Many analysts now seem to feel that the market rebalancing previously anticipated toward the end of 2016 may be approaching sooner.
As oil prices continued to increase in May, wholesale and retail prices followed. The graph below shows the movement of crude oil (converted to gallons) along with wholesale (“rack”) and retail diesel fuel prices over the trailing 15 months:
As this graph shows, all prices increased at a similar rate in May with retail slightly lagging behind wholesale. Retail margins remain at a relatively low level compared to the preceding year as shown in the following graph:
Due to the market changes in May, almost all fleets would have seen a modest increase in their fuel costs. Looking beyond May, the potential for upward movements in prices appears to be more likely than declines. Sokolis anticipates prices will fluctuate near their current levels in the near-term followed by continued gradual increases during the 2nd half of the year.
If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis, [email protected] or 267-482-6159. We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency.
Gain instant access to the ebook!