A pipeline runs toward an oil southbow storage tank at the Cushing Crude Oil Storage Terminal in Cushing, Okla. (Nick Oxford/Bloomberg)
key takeaways:
- Unprecedented foreign demand for US diesel, propane and other fuels as the US-Iran conflict escalated put pressure on stockpiles from the Gulf Coast to the East Coast.
- Record exports led by propane and strong diesel shipments, coupled with Russia’s diesel export ban and new U.S. attacks on Iran, sent prices soaring and supplies tightened.
- US stockpiles have fallen to multi-year seasonal lows, raising questions about the country’s ability to continue supplying global markets as demand is expected to remain subdued.
Unprecedented foreign demand for U.S. diesel, propane and other fuels is straining commercial stockpiles from the Gulf Coast to the Eastern Seaboard as the U.S.-Iran conflict flares up again, sending energy prices soaring.
Propane exports led the record outflows reported by the Energy Information Administration on July 8, with diesel, gasoline and jet fuel cargoes also moving at a stronger pace. The data on shipments for the week ending July 3 was released shortly before Russia announced a ban on diesel exports to deal with domestic shortages.
Meanwhile, US strikes on Iran resumed overnight, and President Donald Trump said more attacks were possible, prompting a rally in the oil complex. Diesel futures jumped as much as 14% in New York for the biggest intraday gain since early days of the struggle.
Given the absence of shipments from Russia, the world’s No. 2 diesel exporter, demand for U.S. fuel probably won’t subside anytime soon.
U.S. diesel exports largely went to South America, with Brazil the top recipient, according to analytics firm Kpler. But shipments to Europe, where prices have also risen, account for about 14% of the total.
On the domestic front, stocks of diesel and other fuels have declined to the lowest seasonal levels in years, a situation that could test the country’s ability to play the role of supplier of last resort.
The data shows that U.S. diesel stockpiles rarely shrink to these levels this time of year. Gasoline stockpiles are at their lowest seasonal level since 2012.
The bulk of propane shipments were headed to Asia, particularly China and Japan, according to Vortexa data. But because the goods are in transit, the final destination may change.
