Diesel crack spreads top $100 as distillate stocks near a multi-decade low
Diesel crack spreads topped $100 a barrel this week, four times the usual $15 to $25. On-road diesel is in the high $5.60s, with the national average at $5.62 a gallon, up 53 percent from a year ago. Crude isn't driving it: Brent is $87.46 and WTI $81.83, both down a fourth straight day. The squeeze is in refining and distillate supply, and it lands on haulers and anyone writing fuel surcharges.
The inventory picture is what makes this more than a bad week. RBN Energy reports distillate stocks are on track for their lowest end-of-month level since April 2005, and the lowest for the month of August since 1951. Refinery outages and thin distillate barrels are tightening supply. The Russia-Ukraine war is still pulling diesel out of the global pool on top of that. Aaron Decker at FreightWaves puts the blame on refining capacity, not the barrel, and the crack spread backs him up.
For jobbers and c-store operators, the read-through is margin pressure you can't hedge away with a crude view. Retail diesel in Maine is $5.65 a gallon against $3.88 a year ago, and Biddeford's school district is budgeting extra just to keep buses running as kids go back.
Russian refinery hits
Ukraine struck the Bashneft-Ufaneftekhim refinery in Ufa, one of Rosneft's largest and the country's fourth-biggest, and the plant halted processing. Astra's OSINT analysis of eyewitness photos confirmed smoke over the site; Ufa's airport closed temporarily. For US operators, every Russian refinery knocked offline tightens the same distillate market that's already at a 75-year August low. Oil prices slipped anyway after news that Qatar's prime minister is visiting Tehran to discuss reopening the Strait of Hormuz.
Ethanol strength
US fuel ethanol production averaged 1.112 million barrels a day in the week ended August 21, up 23,000 barrels a day, and exports jumped 26 percent, per EIA data out August 26. Output ran 42,000 barrels a day above the same week last year, and stocks edged up to 25.206 million barrels. Strong production with rising exports and only a slight stock build is a healthy blend economics signal for anyone splashing E10 or pushing E15. Michigan's House also voted for E15 and E85 tax credits, one more state nudging higher blends.
Propane record
US propane inventories hit a second straight record, with the Gulf Coast and Midwest accounting for roughly 92 percent of the weekly build. RBN says total stocks could approach 119 million barrels by early October if the pace holds. For propane marketers heading into heating season, that's a comfortable starting position on supply, whatever the weather does to demand.
What to watch
Whether the Qatar-Tehran talks produce anything on Hormuz, and whether more Russian refinery capacity comes back or stays offline. Watch the next EIA distillate print for any inventory relief, and the EPA fuel waiver aimed at gas prices for whether it does anything on the diesel side, which it probably won't touch.