Downturn in US Refining Activity Tightens Diesel Supply

In recent weeks, a downturn in U.S. refining activity and disruptions to global trade have led to a tightening of diesel supplies, impacting historically high U.S. diesel exports to Europe.

The challenges in securing U.S. diesel have compounded an existing supply crunch in Europe, which previously relied on Russian fuel exports. This tightening of supplies has caused U.S. diesel cracks to briefly surge to a four-month high of over $48 a barrel this month, reducing arbitrage opportunities to ship the fuel to Europe.

Furthermore, many of Europe’s alternative suppliers in the Middle East and Asia have faced obstacles due to Houthi attacks on vessels in the Red Sea, forcing ships to take longer routes around the Cape of Good Hope. These extended voyages have added significant delays and made the trade less profitable.

The decline in trade coincided with the temporary closure of the 435,000 barrel-per-day BP Whiting refinery in Indiana, a major U.S. diesel producer, following power outages in early February.

Source: Reuters