Increased Diesel Output May Lead to Price Drop

According to Reuters, diesel in many parts of the world should drop below gasoline this summer for the first time since mid-2007.

Refiners have expanded their distillate capacity to cash in on a recent demand boom from the freight and electricity sectors, pulling diesel prices to above gasoline prices for 2008.  However, slumping economies have decreased transport and manufacturing demand, which is expected to restore the balance between the two fuels.

Retail container traffic at major U.S. and Canadian ports fell nearly 8 percent in 2008 and is forecast to fall another 11.8 percent in the first half of 2009, industry watcher Port Tracker said in the beginning of February.

The U.S. trucking industry reported a 20 percent slide in tonnage over the past six months, the biggest drop on record. Government data reports national consumption this year at negative 3.7 percent compared to gasoline's negative 0.5 percent.

U.S. distillate inventories have climbed to about 10 percent higher than a year ago, versus gasoline's 4.4 percent deficit.

Refiners have been cutting production in the United States and parts of Europe and Asia to combat sagging profit margins, reports Reuters.