Diesel Cracks Reach Record Highs Amid Global Supply Constraints
Global diesel cracks have surged to record levels due to a deepening fuel supply shortage driven by geopolitical tensions in the Middle East and Russia. The renewed conflict around the Strait of Hormuz, combined with Russian restrictions on diesel exports following Ukrainian drone attacks on refineries, has tightened markets significantly. ING's commodities strategists note that middle distillate cracks are at historic highs, with ICE gasoil cracks reaching $79 per barrel in Europe and U.S. diesel cracks near all-time levels above $100 per barrel. The market structure reflects acute tightness through backwardation, where immediate contracts trade higher than those further out, signaling concerns over short-term supply availability. Analysts expect these elevated crack spreads to persist due to limited refining capacity globally and ongoing disruptions in key export regions like the Middle East and Russia. Goldman Sachs has revised its forecasts upward, predicting that refiners will see significantly increased profits from this diesel shortage. Diesel prices have outpaced crude oil gains since mid-June as supply constraints continue across multiple geographies. Chinese fuel exports remain subdued due to domestic restrictions, while flows through the Strait of Hormuz are still below pre-conflict levels.
Topics: diesel fuel prices Middle East tensions Russia-Ukraine conflict