Diesel market points down post-election; benchmark slides

The diesel market has experienced a significant decline following the Democratic victories in the recent U.S. elections. The benchmark diesel price, used for most fuel surcharges, has dropped 16.5 cents per gallon to $6.127/gallon, marking the lowest level since October 12. This downward trend follows the futures market for ultra-low sulfur diesel (ULSD) on the CME exchange and other oil contracts, which have also seen declines in response to the prospect of a Democratic Congress and a potentially less interventionist administration in the Middle East.

Amrita Sen, director of market intelligence at Energy Aspects, attributes the market's reaction to the removal of a risk premium as a result of the war. Trade data prior to the election suggested substantial preparations for an imminent strike, but the lack of a strike has led to a selloff. Instead of a bullish outlook, the market is now optimistic that the war in the Middle East will end, as both Democrats and Republicans oppose its continuation.

Contrarily, the energy research team at Bank of America Merrill Lynch argues that global oil supply disruptions have reached record levels in 2026, with production shortfalls exceeding anything seen since 1965. The market initially entered the conflict well supplied, but the cushion is rapidly depleting, particularly in China and across OECD economies. The team's analysis suggests that the direction of the US-Iran war will remain crucial in shaping oil prices over the next 12 months.