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Despite plummeting distillate fuel oil stockpiles, down by nearly -10% just this year, diesel prices have continued to slip lower. Though operable refinery capacity has mostly rebounded from a massive drop off at the end of 2022, that trend might begin to slow due to maintenance needs at US facilities and softening profitability.

Diminishing industrial demand, especially in shipping and trucking, could become a serious concern for refiners and the broader economy. Subdued trade flows into the US are the latest signal that more downside may lie ahead for activity in the transportation sector, as container shipments into US ports are expected to fall by more than a fifth this year.

Related ETFs: VanEck Oil Refiners ETF (CRAK), Energy Select Sector SPDR Fund (XLE), SPDR S&P Transportation ETF (XTN)

Softening demand for diesel fuel is sending prices lower while heightening concerns about global economic growth. Bloomberg notes that falling diesel prices can be a critical economic barometer, viewed as an early signal of weaker industrial activity and reduced consumer spending. The ongoing pullback is now setting off alarm bells and an early signal of an oncoming recession.

In recent days, the price of ultra low sulfur diesel (ULSD), the benchmark used for most diesel surcharges, crashed down through the symbolic $4.00 per gallon mark for the first time since February of last year. A 9.6 cent drop in the latest official data was the largest this year, also marking the 13th time in the past 14 weeks that the price has dropped.

The price slide for diesel comes as US stockpiles of distillate have contracted close to 8-month lows. Diesel is a light distillate fuel oil, and figures from the Energy Information Industry (EIA) show distillate stockpiles have…

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