Key facts
- Refining margins for gasoline and diesel have surged to record highs.
- Russia's ban on diesel exports and low global fuel inventories are key drivers.
- European diesel refining margins reached over $60 per barrel.
- US prompt NYMEX 3-2-1 crack spread hit a record $64.58 per barrel.
- Fuel inventories in the US are near five-year lows.
Refining margins for gasoline and diesel have surged to new record highs this week, driven by escalating tensions in the Middle East, Russia's recent ban on diesel exports, and critically low global fuel inventories. These elevated margins, representing the spread between crude oil prices and the value of refined products, indicate a very tight global fuel market.
In Europe, diesel refining margins climbed to over $60 per barrel on Wednesday following Russia's decision to halt diesel exports, a move aimed at addressing its domestic fuel crisis exacerbated by Ukrainian drone attacks on Russian refineries. Concurrently, European gasoline traded at a four-year high premium to crude, reaching $41 per barrel, a level not seen since the summer of 2022.
In the United States, the prompt NYMEX 3-2-1 crack spread contract, a key indicator of refinery profitability, reached a record high of $64.58 per barrel on July 8. This tightening availability is compounded by refiners adjusting to new Middle Eastern crude supplies and multi-year low fuel inventories across many nations, including the US.
Analysts from Sparta Commodities highlighted that the anticipated supply relief may not materialize due to the removal of Russian barrels, uncertainty surrounding Chinese export volumes, and the added risk from Middle East re-escalation. They noted that European cracks have surpassed $60 as regions like Brazil, Africa, and Turkey seek replacement barrels from India, the Middle East, and the US Gulf, while US diesel stocks are already near five-year lows.