A seriously low U.S. and global diesel supply is likely to drive up fuel costs and worsen inflation, raising concerns as the cold weather months approach. “The national numbers for distillates are pretty tight,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
“It’s uncomfortable. That doesn’t mean that you’re going to see widespread outages, but if we get a bout of cold weather, things could be challenging.”
Analysts say that a confluence of factors, long bubbling beneath the surface, are now coming to a head as colder temperatures bring more seasonal demand for diesel, a fuel that powers trucks and buses and is also used in heating.
“This is the start of heating oil season. This is when demand really starts picking up as we enter the winter months,” said Debnil Chowdhury, the head of North and Latin American refining and marketing research at S&P Global Commodity Insights.
The country has about 25 days worth of diesel left, a level that’s considered very low. De Haan said that normally, the country’s supply is closer to the “low to mid-30s” in terms of the number of days remaining.
Much of the country’s attention has been focused on gasoline prices, which have fluctuated throughout the year. They have generally fallen in recent months following a peak of $5 per gallon in June. Gasoline and diesel are products made from oil, and oil prices soared after Russia’s invasion of Ukraine.
A confluence of factors has also strained diesel markets. These factors include reduced refining capacity due to the pandemic, increased demand amid COVID-19 recovery, and Chinese export quotas, Chowdhury said.
“Diesel demand came back a lot faster than other products. There are refineries that shut down across the globe so the ability to supply was hindered,” he said. “And then finally, China, which is a larger diesel exporter … wasn’t able to export.” (SOURCE)
