Midwest, USGC Diesel Prices Up 11% on Week Amid Russia Ban


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Russia's decision to maintain its emergency embargo on 
finished fuel exports through the year-end is keeping global buyers scrambling 
for U.S. supply, driving Midwest and Gulf Coast diesel prices up about 11% on 
the week.

   Moscow plans to lift producer diesel export restrictions as stocks 
stabilize, but continuous Ukrainian attacks on Russian refineries and local 
shortages mean bans on gasoline and non-producer distillates will stay through 
2026.

   Russian diesel exports have also declined as Ukrainian attacks continue to 
disrupt refinery operations, cargo data shows, adding to tightening supplies in 
the global distillate market.

   For refiners across the U.S. Gulf Coast and Midwest, the global deficit 
secures an extended window of premium pricing, shielding domestic crack spreads 
from late-summer decay.

   Gulf Coast Grade 62 ULSD spot prices averaged $4.2287 gallon for the current 
week, jumping 40.46cts, or 10.58%, higher from the previous week's average of 
$3.8242 gallon, DTN data showed.

   In the Midwest, Chicago ULSD spot prices rallied 40.22cts, or 10.90%, on the 
week to average $4.0934 gallon. Group 3 ULSD, meanwhile, jumped 38.92cts, or 
10.47%, to average $4.1079 gallon.

   West Coast refiners will largely miss out on the arbitrage windfall, as 
geographical and logistical isolation prevents PADD 5 operators from moving 
prompt gasoline or distillate batches into Atlantic Basin trade routes.

   To capture lucrative transatlantic netbacks, Gulf Coast refiners ramped up 
processing capacity during the week ended August 7, pushing regional 
utilization up to 97.9% of operable capacity, U.S. Energy Information 
Administration (EIA) data showed.

   While Gulf Coast distillate inventories rose by a modest 500,000 bbl to 41 
million bbl, regional stocks remained 3.3 million bbl below year-ago levels. 
Regional jet fuel inventories dropped by 500,000 bbl to 15.1 million bbl with 
zero waterborne imports reported.

   PADD 2 operators, meanwhile, responded to the tight physical market by 
pushing crude runs to 4.210 million bpd, driving regional refinery utilization 
to 98.6%. Despite that high run rate, Midwest distillate stocks managed only a 
600,000 bbl weekly build to 28.6 million bbl, while regional jet fuel 
inventories held completely flat at 7.7 million bbl.

   Deprived of coastal backup along the TEPPCO and Explorer pipeline networks, 
cash markets in the Midwest must rely entirely on regional processing output to 
defend spot inventory levels, driving a massive double-digit percentage surge 
in regional physical cash valuations.

   With Midwest distillate imports averaging a meager 4,000 bpd down 16,000 bpd 
from previous year levels -- physical traders across the PADD 2 distribution 
network must continue to defend regional stock levels through elevated spot 
basis bids as Cycle 1 pipeline schedules roll through.

    




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