Crude falls 3% as U.S. offers last 40 million SPR barrels, but diesel futures rise and pump diesel is $6.38

The Energy Department will offer another 40 million barrels of crude from the Strategic Petroleum Reserve through an exchange, the last tranche of the 172 million barrels the U.S. pledged to the International Energy Agency's coordinated emergency release, OilPrice.com reported on Tuesday. Reuters also reported the loan and called it the final batch under the global deal.

Crude fell. In afternoon trading OilPrice.com's board showed U.S. benchmark WTI at $89.77, down 3.1%, and Brent at $102.90, down 2.3%. Heating oil futures, the benchmark for diesel, rose 1.9% to $4.846 a gallon. That split is the story for anyone who buys fuel by the truckload.

The reserve math

The Energy Information Administration's weekly count put the SPR at 284.6 million barrels on Sept. 18, down from 415.4 million in late March, before the drawdowns began. That is 130.9 million barrels out in about six months. Take away another 40 million and the reserve would sit near 244.6 million barrels.

That figure matters because federal law restricts non-emergency drawdowns once the reserve falls below 252.4 million barrels, as OilPrice.com noted. This release runs under emergency authority, so the floor does not block it. But once the tranche is out, any further sale that is not tied to a declared emergency would be harder to justify. OilPrice.com said the reserve is on course for its lowest level since 1982.

These barrels are loaned, not sold. Companies that take exchange crude must return more later as interest, and the Energy Department has said the program will eventually bring back about 200 million barrels. We covered how the exchange accounting works in our Sept. 24 story on the reserve.

What the "oil falls" headline gets wrong

The SPR holds crude oil. The tight market is in distillates: diesel and heating oil. OilPrice.com reported distillate inventories were 14% below the five-year average at the start of September, with gasoline 6% below.

The futures spread shows the gap. At $4.846 a gallon, heating oil works out to about $203.50 a barrel (42 gallons a barrel). That is roughly $100 a barrel above Brent and about $114 above WTI on the same board. Refiners earn that margin for turning crude into diesel, and a crude loan does not narrow it directly.

At the pump, the EIA's weekly survey for Sept. 28 had the national average for diesel at $6.382 a gallon. That is down 14.7 cents on the week but $2.628 above a year ago. Regular gasoline averaged $4.465, down 1.3 cents.

Who it hits

A fleet burning 1,000 gallons of diesel a week is paying about $6,382 for it, compared with roughly $3,754 a year ago. That is $2,628 more every week, or about $137,000 over a year at that pace. Last week's 14.7-cent drop saves that fleet $147 a week. Rising diesel futures on Tuesday suggest the relief may not carry into next week's survey.

24,679 independent trucking and freight are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 2,868 in TX, 2,828 in CA, 1,916 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

Landscapers, excavation crews and heating-oil dealers face the same diesel math. We have covered the landscaping and trucking angle in our diesel export-ban story.

What to watch

• Wednesday's EIA weekly petroleum report: the SPR count and distillate stocks.
• The EIA pump survey due Oct. 6, to see whether Tuesday's diesel futures rise shows up at the retail level.
• Whether other IEA members deliver the emergency barrels they pledged. OilPrice.com reported Energy Secretary Chris Wright pressing European countries that have released only a fraction of their commitments.

Follow crude on our crude oil chart.

Sources: OilPrice.com; Reuters; EIA weekly SPR stocks; EIA Gasoline and Diesel Fuel Update. Futures prices are intraday and may be delayed. This is market information, not investment advice.