Retail diesel prices have been holding above year-ago levels since the beginning of the fall amid tightening inventories. On-highway diesel rose 9.8 cents this week to an average of $3.718 per gallon, according to the Energy Information Administration. Prices were also 14.5 cents above the same week last year. 

Prices had strengthened over the past few months amid Middle Eastern tensions. Prices have come off their summer highs but remain elevated due to tighter domestic inventories and production. 

U.S. diesel inventories have been below year-ago levels for most of this year, according to weekly EIA data. Weekly production data also showed that distillate production fell to the lowest level since March. Refinery closures have had the largest impact on tightening inventories, though strong export demand has also contributed to inventory declines. 

The EIA forecasts U.S. total distillate inventories, which include diesel fuel, to be lower than in previous years due to those inventory draws. 

“Lower distillate inventories elevate the risk of higher prices and price volatility from supply disruptions, especially during periods of high demand like the autumn harvest and winter heating season,” the EIA said in its September Short-Term Energy Outlook.

The diesel crack spread, which shows the relationship between diesel and crude oil prices, is trading at the highest since February 2024. Additionally, diesel forward curves have been signaling market tightness, suggesting there may be better times to buy diesel as we move past the harvest season. 

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