U.S. Refiners Ramp Up Diesel Production to Record Levels

U.S. refiners are increasing diesel production to near-record levels, with an average of 5.3 million barrels of distillate fuel oil produced every day in July, according to the U.S. Department of Energy. This pace is expected to result in the highest diesel production in July on record, and one of the highest months outside of winter. The increase is driven by a global supply squeeze caused by the Russia and Iran wars, strong exports, and concerns about disruptions through the Strait of Hormuz. Analysts expect further diesel market tightness as refinery maintenance season approaches, while low U.S. inventories risk higher prices heading into winter. Diesel prices at the pump have risen above $5 a gallon, and gasoline prices have risen above $4 a gallon, renewing worries about inflation. Profit margins for making diesel from crude oil in the U.S. and Northwest Europe have surged to all-time highs. The U.S. is on track for the second-most exports of distillate fuel in July on record, with countries from South America to Europe scrambling for supplies. This has left little cushion domestically, with America’s stockpiles already well below average levels for midsummer, raising the prospect of tight supply and high diesel prices in the fall.