Key facts
- U.S. refiner margins reached a record high for the third consecutive session.
- The 3-2-1 crack spread, a key profitability benchmark, closed at a record $69.66 a barrel.
- Tight diesel inventories are exacerbated by global supply issues.
- Gasoline stockpiles are dwindling, reaching their lowest level for this time of year since 2012.
- Retail gasoline prices have increased significantly compared to the previous year.
U.S. refiner margins have reached new record highs for three consecutive sessions, driven by dwindling fuel stockpiles and escalating Middle East tensions that threaten supply. The 3-2-1 crack spread, a key measure of refiner profitability, surged to a record $69.66 a barrel.
International buyers have increased demand for U.S. fuel supplies due to the Iran war, leading to record fuel exports but depleting domestic stockpiles. This situation is increasing fuel prices during the peak summer driving season, impacting consumers and farmers.
Diesel, a major component of global oil consumption, has been a primary driver of refiner economics. Years of tight inventories due to refinery closures, coupled with disruptions from the Iran war and a recent ban on Russian exports, have tightened the global diesel market.
While U.S. diesel inventories saw an increase last week, they remain significantly below previous levels and the five-year seasonal average. Meanwhile, gasoline supplies are becoming a growing concern as refiners prioritize higher-yield diesel and jet fuel. This imbalance has led to a sharper decline in U.S. gasoline stockpiles since late February.
U.S. gasoline inventories are at their lowest for this time of year since 2012. The national average retail gasoline price has risen by nearly 80 cents from last year to $3.95 a gallon. Analysts predict further price increases for motorists as refiners may need higher gasoline prices and margins to shift production focus back to gasoline.
The gasoline crack spread settled around $59 a barrel, while the diesel crack spread reached a record high of over $91 a barrel.