Diesel jumps 20 cents in hours as refinery outages and record tanker rates squeeze US supply
Diesel jumped 20 cents in a matter of hours as inventories keep falling. For anyone buying at the rack this week, that twenty cents lands straight on the cost of fuel. The spike is coming off refinery problems as much as crude supply, which means a jobber can't just watch the barrel and call his landed cost.
The 20-cent move
The ULSD run-up this fast tells you supply is thin before you get to the geopolitics. Refinery issues are driving global fuel prices as much as crude is, so the usual tie between Brent and your rack number is loose right now. Pull hard on a tight system and the price gaps up.
Red-dyed diesel policy is part of the FreightWaves read on why the market is so jumpy. Off-road and on-road supply are drawing from the same strained barrel, and when distillate stocks fall this low, most allocation calls get tighter. Watch your terminal's pull limits before you watch the screen.
Heavy crude stranded
Record tanker rates, driven to all-time highs by the Middle East crisis and a vessel shortage, are stranding heavy crude in the Americas. Canada produces over 5 million barrels a day, most of it heavy, and about 4 million of that normally runs south to US refineries. Venezuelan output has moved up too.
So the Americas are oversupplied on heavy grades while Asia and Europe are short of them. For a US refiner that runs heavy sour, cheaper discounted feedstock could help crack spreads if they can keep the units running. That won't show up at the rack overnight, and if those refinery issues above keep units down, the cheap crude does a jobber no good.
Houthi attacks
Houthi attacks escalated and hit Saudi Aramco headquarters. The same conflict is pushing tanker rates to records, and it sits under the diesel move as the geopolitical piece. No US supply has gone offline from it directly, but it has already pushed freight costs higher.
Taiwan and Alaska LNG
Taiwan committed up to $4.4 billion to the Alaska LNG project and agreed to buy 30% of its output over 20 years, Trump said. The plant and its pipeline aren't built yet, so this moves nothing for a US marketer this quarter. File it under long-term export demand.
What to watch
Distillate inventory numbers are the next tell on whether the 20-cent move holds or backs off. Watch terminal allocation limits as stocks draw. If the Middle East fighting eases, tanker rates could come down and loosen the freight squeeze on everything that floats.