Week in Review – Bearish Momentum Builds as Crude and Diesel Extend Weekly Declines

Crude and diesel futures extended their downward trend this week, continuing a slide that began in late September. Front-month contracts for both remain under bearish pressure, driven by a combination of macroeconomic uncertainty, global trade friction, and shifting supply fundamentals. Ongoing U.S.-China tariff tensions, regional U.S. bank write-offs, and broader concerns about economic growth have all weighed on sentiment, pushing markets into their third consecutive week of decreases.

The International Energy Agency added to the bearish outlook this week by raising its 2026 oversupply forecast by 20%, now projecting a global surplus of nearly 4 Mbpd. Meanwhile, U.S. President Donald Trump announced plans to meet with Russian President Vladimir Putin in Budapest within two weeks to discuss potential pathways to end the war in Ukraine, adding a geopolitical layer to the market's uncertain trajectory.

China's onshore crude inventories declined slightly from record highs, a seasonal shift reflecting steady demand patterns, while Canadian crude shipments through Vancouver jumped to a record pace, while rising Chinese demand for heavier grades is a notable pivot away from U.S. barrels. Efforts by the U.S. to curb India's purchases of Russian crude have produced conflicting signals, with Washington citing significant reductions while Indian sources report little immediate change.

In refined products markets, the European Commission updated compliance guidelines for its ban on imports of fuels processed from Russian crude, calling for enhanced due diligence on shipments originating in Turkey, India, and China. Domestically, the EIA reported a larger-than-expected 3.5-million-barrel crude build last week. It's the third consecutive storage build alongside draws in both gasoline and distillate inventories. Despite the crude build, U.S. crude stocks remain roughly 4% below the five-year average for this time of year, gasoline inventories are slightly below average, and distillates are about 7% under seasonal norms.

As expected, refinery utilization declined sharply this week due to seasonal maintenance outages, falling 6.7% in just one week. While this seasonal slowdown is normal for October, it has meaningful implications for diesel supply. Despite the initial market reaction which saw prices move lower following the data release, reduced refinery throughput tightens the supply outlook for distillates.

The impact is already visible in the data. Days of supply for diesel have declined, and inventories remain about 7% below their five-year seasonal average. If planned refinery closures persist through the coming weeks, inventories could tighten further before recovering once units return to service later in the fall.

The combination of softer prices, bearish forecasts, and tighter distillate inventories underscores the complexity of the current market environment. While near-term sentiment remains bearish, these conditions create opportunities for procurement teams to take a proactive approach. Locking in price risk management strategies now while futures are lower can help shield budgets from future volatility and position businesses for greater cost certainty when markets inevitably turn bullish.

Prices in Review

Crude prices opened the week at $59 on Monday and experienced modest fluctuations over the following days. Prices edged slightly higher to $59.58 on Tuesday before beginning a steady decline midweek, falling to $58.60 on Wednesday. A brief uptick on Thursday brought prices to $58.77, but the downward momentum resumed by Friday, with crude opening at $57.50 - the lowest point of the week. Overall, crude prices fell by $1.50 per barrel, or 2.54%, week-over-week.

Diesel prices opened the week at $2.2123 per gallon on Monday and saw modest volatility over the following days. Prices climbed to a weekly high of $2.2549 on Tuesday before reversing course midweek, falling to $2.2002 on Wednesday and $2.1941 on Thursday. The downward momentum continued into Friday, with diesel opening at $2.1564 - the lowest level of the week. Overall, diesel prices declined by $0.0559 per gallon, or 2.53%, week-over-week.

Gasoline prices opened the week at $1.8124 per gallon on Monday and experienced moderate fluctuations throughout the week. Prices climbed to a weekly high of $1.8491 on Tuesday before dipping slightly to $1.8267 on Wednesday. A modest increase followed on Thursday, with prices reaching $1.8414, but they returned to near-weekly lows by Friday, opening at $1.8125. Overall, gasoline prices were virtually unchanged week-over-week, rising by just $0.0001 per gallon, or 0.01%.