By: Editorial Team, StoneX Media
With crack spreads on both diesel and gasoline at extreme highs and Gulf Coast plants running near seasonal capacity peaks, U.S. refiners are posting margins that have not been seen at this stage of the year for some time. Refined product exports have climbed by more than 1 million barrels per day compared to the prior year, with diesel volumes alone up close to 30%, cementing the United States as the world's marginal supplier of refined fuels. The export boom is the engine behind record-level Gulf Coast refining economics. It also sits on a policy fault line that the sector has not yet been forced to reckon with directly.
Alex Hodes, Director of Energy Market Strategy at StoneX, tracks the refinery-level signals that connect Gulf Coast run rates to global product flows and export policy risk. His work sits at the intersection of crack spread dynamics and the downstream market conditions that determine when domestic pricing pressure begins to translate into political exposure for exporters.
The United States has become the world's marginal supplier of refined products, and the export data now confirms the scale of that shift. "Refined products in particular are up over a million barrels per day from April and May in comparison to the previous year,"] Hodes notes, with diesel volumes leading at close to 350,000 barrels per day above year-ago levels, a gain of roughly 30% year over year. Gulf Coast refiners are running near peak utilization for two reasons at once. Crack spreads on both gasoline and diesel are at extreme highs, and operators are simultaneously building gasoline inventories ahead of the summer driving season by exporting surplus barrels rather than holding them domestically. "We're continuing to see the rest of the globe pull on the U.S. as the marginal supplier of refined products globally," he adds, a structural position the U.S. has not occupied at this scale before.
The export boom is profitable as long as domestic prices stay manageable, but the same crack spread dynamics driving margins higher carry the seeds of a policy response. "An export ban, if that actually gets brought up and put into place, that would be the big risk to the downside for refiners," Hodes notes. The path to that outcome requires a sustained move to extreme domestic fuel prices, a threshold the market has not yet approached. Gasoline demand is structurally inelastic because most consumption is driven by commuters who have no short-term alternative, which means demand destruction has not materialized even as inventories begin to draw down. A fuel export restriction only becomes politically viable well above current price levels, and the signal to watch is not a single number but the point at which inventory draws become severe enough to force the issue.
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--- Written by Gus Farrow, Senior Manager, StoneX TV
--- Expert: Alex Hodes, Director of Energy Market Strategy, StoneX
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Rising oil prices are becoming a bigger concern for investors as geopolitical tensions threaten to reignite inflation pressures. The latest developments in the Middle East highlight how energy markets can quickly reshape the outlook for equities and interest rates.
June 11 – Iran-related headlines are again moving the markets this morning, along with more inflation related data that was released. Stock futures are mostly higher to start the day, while the VIX is also elevated to trade near 21. The dollar index is trading near 100.1. Yields on 10-year Treasuries are trading near 4.53%, while yields on 2-year Treasuries are trading near 4.14% as the yield curve continues to slowly flatten on rising inflation concerns. WTI crude oil is trading near $90 per barrel, while Brent trades near $93 per barrel. The grain and oilseed markets were mixed to lower overnight.
June 10 – Stocks fell and crude oil prices rallied after President Trump posted a message essentially saying that Iran had “taken too long to negotiate a deal,” and that “now they will have to pay the price!” Additional volatility came from this morning’s consumer inflation data, which came in hot, but similar to expectations. That allowed stock futures to come off their session lows. The VIX is trading near 21 at this hour, after trading as high as 22.5 earlier in the session. The dollar index is trading near 99.9. Yields on 10-year Treasuries are trading near 4.53%, while yields on 2-year Treasuries are trading near 4.12%. WTI crude oil is trading near $90 per barrel this morning, while Brent trades near $92 per barrel. The grain and oilseed markets are mostly higher this morning, along with the energies.
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