Dog Days of Diesel

Diesel continue to wag the tail of global oil markets

Dog Days of Diesel
Photo by Tasos Mansour / Unsplash
The moves in U.S. diesel crack spreads recently are historic and can't be overstated or discussed too often at the moment given the potential negative impact on the global economy

IMO 2020, refinery closures, a snapback in demand in a market short of supply has created historic, never seen before diesel cracks spreads

Diesel cracks approached $95/Bbl, pushing wholesale diesel to $4.63/gallon average during the last week of April

All-in diesel costs nearly exceeded $200/Bbl (oil + diesel crack)

We aren't even in the dog days of summer driving season yet, but the U.S. and global refinery system appear to be in a race to match supply and looming demand destruction

Diesel Spikes - Not What the Deflation Doctor Ordered

The different between diesel and gasoline cracks over the history of RBOB futures is shown.  The U.S. refining system has never seen anything like this.

The weekly spread between oil (converted in $/gallon) and diesel over the last year crystalizes how much diesel cracks have blown out recently.  

It can be seen that discombobulated diesel markets began in the first week of March - right after Russia invaded Ukraine.  Sanctions, or the expectations of them, changed everything.  

The U.S. and world are still figuring things out.  

+$2.19/gallon crack in the last week of April = $92/Bbl

Summer 2022 will get interesting without demand destruction