Multiple US diesel benchmarks hit all-time highs amid tanker strikes

The US Gulf Coast ultra low sulfur diesel benchmark climbed to an all-time high on Sept. 9 amid escalating geopolitical tensions and a dim domestic inventory outlook.

Platts, part of S&P Global Energy, assessed Gulf Coast ULSD at $4.816/gallon on Sept. 9, up 24.07 cents/gal from the day prior, its highest value since Platts began the assessment in May 2006. The previous all-time high was observed just eight days ago, at $4.6973/gal.

The underlying NYMEX October ULSD futures contract rose to $4.801/gal, up by 23.32 cents/gal on the day to the highest prompt-month settlement since April 2022, when it stood at an all-time high of 513.54 cents/gal.

"Insane moves on futures, these prices are getting ridiculous," a middle-distillates trader said Sept. 9, after the US military destroyed five Iranian crude tankers and Iran launched retaliatory strikes on vessels across the Gulf.

In addition, three other Platts benchmark middle-distillate price assessments hit record highs.

Gulf Coast Export ULSD, tracked since December 2014, rose 21.57 cents/gal to hit 444.41 cents/gal.

Gulf Coast ultra low sulfur heating oil, assessed since July 2013, increased 24.27 cents/gal to reach 448.45 cents/gal.

In the Midwest, Group 3 Pipeline ULSD, assessed since June 2012, rose 19.82 cents/gal to 479.10 cents/gal.

Strong fundamentals persist

The same market fundamentals that powered diesel to its peak on Sept. 1 were in play on Sept. 9.

The front-month USGC ULSD crack spread versus West Texas Intermediate crude rose $6.505/b to $98.352/b, the highest value since Platts began the assessment in June 2009. The previous all-time high, like the previous Gulf Coast ULSD high, was recorded on Sept. 1.

With export arbitrage opportunities remaining highly attractive, the US is struggling to build its domestic inventories, even as refinery utilization rates stand at 98%, the latest Energy Information Administration data released on Sept. 2 for the week ending Aug. 28 showed.

According to the latest S&P Global Energy ArbFlow report, the USGC-Europe arbitrage is open at $4.61/barrel, the highest since Aug. 20, while the USGC-Mediterranean route is open at $2.17/b, a 12-day high.

This favorable export environment has contributed to record US exports in August. S&P Global Commodities at Sea data tracked 54.2 million barrels shipped abroad, up 7.6 million barrels from the previous record set in July. This marks the third time since the start of the war in the Middle East that US exports have reached an all-time monthly high.

Regionally, inventories are feeling the strain. On the Atlantic Coast, stocks dropped to 18.43 million barrels, the lowest level since 2014, according to EIA data. As the heating oil season approaches and households prepare for colder months, demand is expected to rise. At the same time, the region's main diesel supplier, the Irving Saint John refinery in Canada, is set to begin a 75-day RFCCU turnaround in September, further tightening regional fuel supply.

The Midwest is facing a similar outlook. With the harvest season nearing in the country's agricultural hub, stocks remain low. The most recent EIA data puts inventories at 27.9 million barrels, 1.8 million barrels below the preceding five-year average.