Diesel prices hit a fresh record above $6 a gallon, fueling worries that inflation will keep climbing
Diesel prices in the U.S. reached $6.0556 a gallon for the first time.
Oil prices fell on Friday for the first time in more than a week, but remained close to four-month highs, as retail diesel prices hit a record.
The decline was welcome news to the stock market, as investors have suffered through a streak of declines amid worries that inflation from rising oil prices will boost borrowing costs and slow economic growth.
Brent crude's November contract (BRN00) (BRNX26) declined by 3.1% to $104.26 a barrel, heading toward the first decline in six sessions. The international benchmark, which settled at a four-month high on Thursday, has surged 15% since the start of September.
West Texas Intermediate's October contract (CL.1) (CLV26), the U.S. benchmark, fell 3.2% to $99.18 a barrel, putting it on track to snap an eight-session streak of increases, the longest in three years. The yield had closed Thursday above $100 a barrel for the first time in four months.
The weakness in crude oil provided some relief to Wall Street, as stock futures rallied to the first gain for the market in five sessions. The drop in oil even offset consumer-inflation data that came in a little higher than expected.
Helping ease the upward pressure on oil prices, the Financial Times reported late Thursday that Gulf foreign ministers are planning to meet officials from Iran in hopes of securing a deal to temporarily support shipping through the Strait of Hormuz, an initiative encouraged by Oman and Iran.
For Patrick Munnelly, market strategist at Tickmill Group, the pullback in oil prices does not equate to risks disappearing in the waterway, but signals investors weighing a slower, more prolonged conflict.
"It shows that the market has moved from pricing a sudden 'Armageddon' scenario to pricing a more continuous, probabilistic disruption," he said. "Oil prices remain supported by geopolitical risk, but they are retreating from elevated levels because traders are reassessing whether the actual physical impact justifies the earlier panic premium."
Meanwhile, average diesel prices in the U.S. reached $6.0556 a gallon for the first time ever, marking a jump of 63% since this time last year, according to AAA. In California, diesel prices have risen as high as $7.9827 a gallon.
The moves in oil also come after the International Energy Agency said it expects demand for oil to fall by 2.5 million barrels per day this year, a higher estimate than last month's forecast of a decline of 1.6 million for 2026.
Oil supply is poised to fall by 5.7 million barrels a day to 100.7 million barrels per day for the year, with recovery not anticipated until 2027, per the IEA's September report on the oil market.
"The continuing impasse in negotiations between the United States and Iran delays the prospect of a normalisation of flows into next year," it said.
The agency also found that oil production slipped by 1.6 million barrels per day month-over-month to 100.1 million barrels in August as shipping through the strait remained constrained.
Bloomberg reported Thursday that Saudi Arabia told members of the Organization of the Petroleum Exporting Countries its production of crude oil in August plunged to its lowest level since 1990.
It comes as tensions have escalated between the country and Yemen's Iran-backed Houthi rebels, who on Thursday seized control of Yemen's port city of Mokha, an area key to international shipping through the Red Sea.
And on Friday, Yemeni government sources reportedly told Reuters that the Houthis reached the country's town of Dhubab, which is positioned on the Bab el-Mandeb ?Strait, a key route for global trade.
-Nora Redmond