Diesel Cracks Hit Record Highs as Global Fuel Squeeze Deepens

Diesel prices in the global market have reached record highs this week, with the ICE gasoil crack hitting a new high of $79 per barrel. The situation is exacerbated by the Middle East's re-escalation and the Russian ban on diesel exports due to Ukrainian drone attacks on refineries. In the United States, the diesel crack is trading above $100 per barrel, nearing all-time highs seen last month.

The market tightness is evident, with the ICE gasoil Sep/Nov spread at a backwardation of $80/t, indicating concerns about immediate supply. The global refining system lacks the capacity to compensate for the current disruptions, according to ING's commodities strategists Warren Patterson and Ewa Manthey. Factors contributing to the diesel market's tightness include the ongoing conflicts in Iran and Ukraine, which limit product supply from the Middle East and Russia, and the delayed rebound of Chinese fuel exports following months of restrictions.

Goldman Sachs has revised its profit forecast, projecting a doubling of total profits for refining companies due to the global diesel shortage.