On Feb. 8, diesel prices increased to $2.80 per gallon, the highest level since March 16, 2020. - Data: Energy Information Administration

On Feb. 8, diesel prices increased to $2.80 per gallon, the highest level since March 16, 2020.

Data: Energy Information Administration

Shrinking crude stockpiles and a tighter market driven by the efforts of oil producers to restrain production have driven diesel prices to the highest levels since early last year.

On Feb. 8, diesel prices increased to $2.80 per gallon, the highest level since March 16, 2020. The price of diesel has trended upward since November 2020, according to data from the Energy Information Administration.

The increase in oil prices is led by recovering demand and suppressed supply, the roll-out of the COVID-19 vaccine, and falling inventories, speculates Forbes Senior Contributor Michael Lynch. Lynch is also a distinguished fellow at the Energy Policy Research Foundation and president of Strategic Energy and Economic Research.

Despite the increase, oil prices and consumption remain below pre-pandemic levels.

Brent crude is approaching $60 a barrel, a rise of more than 50% since the end of October 2020. And West Texas Intermediate, the benchmark price for crude oil in the U.S., last week rose above $55 for the first time in over a year.

Current oil prices are above the futures price, implying that the market has tightened, Forbes’ Lynch explained.

Some analysts from the Wall Street Journal and Bloomberg reported that the market has tightened as a result of the efforts of the Organization of the Petroleum Exporting Countries and its allies last week to restrain production. Oil producers that agreed to the cuts have held back 2.1 billion barrels of oil, OPEC told WSJ last week.

“Crude prices have been rising higher now that OPEC+ has convinced the energy market that they are determined in accelerating market re-balancing without delay,” Edward Moya, senior market analyst at Oanda, told Reuters.

American producers are pumping 17% less crude than they did on the eve of the pandemic, the EIA told the WSJ.

Stockpiles of oil accumulated early last year have been tapped into and used faster than expected, which could pave the way for price increases if demand picks up in developed economies, WSJ’s Wallace said.

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