Global diesel disruptions ripple through US refining, biofuel markets
Global supply disruptions have propelled US diesel prices higher, prompting refiners to increase output while reshaping the economics of biodiesel, renewable diesel and D4 RIN credits. Since the US-Iran conflict began in late February, reduced global oil supplies have driven the benchmark US Gulf Coast ultra-low sulfur diesel price up by more than $2.10/gal, or ...
The global diesel crisis is causing significant disruptions in the US refining and biofuel markets. As a result of the US-Iran conflict, diesel prices have jumped by over $2.10 per gallon, marking a 77% increase. September saw four record highs, with the highest price reaching $5.18 per gallon on September 15. The latest assessment, as of September 18, had US Gulf Coast ultra-low sulfur diesel (ULSD) priced at $4.912 per gallon.
Russia's decision to prolong diesel export restrictions until the end of October has further fueled the price surge. These restrictions aim to stabilize Russia's domestic fuel market by limiting diesel, marine fuel, and gasoil exports. The resulting demand for US barrels has increased, creating lucrative export arbitrage opportunities.
Meanwhile, the US has been grappling with low ULSD inventories, exacerbating the price pressure. In response, US refiners have boosted production, with domestic diesel output rising to 5.036 million barrels per day (b/d) from the five-year average of 4.615 million b/d. A substantial portion of this additional supply is being exported.
The surge in diesel prices has also reshaped the biodiesel and renewable diesel industries. US refiners are currently producing diesel at a record-high profit. The benchmark US Gulf Coast ULSD crack spread, which measures the profitability of refining diesel from crude oil, has skyrocketed to $103.19 per barrel, a 224% increase from last year.
The biodiesel industry's benchmark, the BO-HO spread between soybean oil and ULSD, has plummeted to its lowest level in seven years, falling by 110% since September. This has encouraged biodiesel production, with production increasing by 42% since the start of the year to 129 million gallons in May. Renewable diesel production has also surged by over 62% to 318 million gallons.
However, the reduced spread has negatively impacted D4 Renewable Identification Number (RIN) prices. D4 RINs, which are used by obligated parties to meet renewable fuel blending requirements, fell by 36.75 cents, or 16%, between September 1 and September 18, dropping to $1.9275 per RIN. Despite the declining trend, market participants believe the lack of upward movement is due to the low BO-HO spread, which continues to promote RIN production and maintain prices at their current level.
Written by urgent.news from Hellenic Shipping News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.