In March, US diesel demand hit a 26-year low for that time of year, driven by slowing economic growth. The decline in demand for distillate, the fuel used in trucking, heating, and heavy industries, reached 3.67 million barrels a day according to data from the US Energy Information Administration. This figure was revised downward from previous estimates, indicating a significant drop in consumption.
The decrease in the diesel market serves as a warning sign for potential challenges in broader oil demand growth, as noted by Dennis Kissler, a senior vice president for trading at BOK Financial Securities. Diesel consumption typically decreases when the economy slows down, which can also lead to reduced demand for other fuels. Refining margins have already started to show weakness in Asia and have declined from their previous highs in the US.
Kissler attributes these trends to the slowing economies in Asia and the US, as well as tightening consumer spending habits due to inflation. The impact of these factors is evident in how consumers are scaling back on spending compared to a year ago. This shift in diesel demand reflects larger economic challenges that could affect the oil industry in the future.