Around 14% of global refining capacity has gone offline, roughly double the level normally seen for the season. Diesel and gasoline margins are moving apart because the refineries knocked out in Russia and the Middle East mostly export middle distillates, while gasoline demand is easing with the end of the driving season. Gasoline margins remain high by historical standards but have come down from their peak. Diesel, meanwhile, is heading into its strongest demand season with supply still shrinking.
Bruno Santos, StoneX Brazil, Market Intelligence Analyst, covers energy markets from Campinas, delivering price research and market intelligence to commercial clients across South America. His work tracks production, supply and demand, trade flows and price formation across the energy complex, from crude oil to the refined fuels that set diesel and gasoline margins.
Key Themes from the Discussion
Around 14% of global refining capacity went offline, roughly double the normal seasonal level.
Refinery outages in Russia and the Middle East mainly remove middle distillates, hitting diesel harder than gasoline.
Gasoline margins are easing as the driving season ends, but winter heating demand adds pressure on diesel.
Refinery Outages Strip Middle Distillates From Diesel Supply
Refinery outages are hitting diesel supply hardest because the plants knocked offline in Russia and the Middle East mostly export middle distillates. Russia accounts for the largest share of the disruption, which is why the Russian government has banned diesel exports. According to Santos, "Ukrainian attacks have taken more than half of the country's processing capacity offline in recent months." Refineries in the Middle East, including in Saudi Arabia, have also faced shutdowns after attacks, while scheduled maintenance has taken more than 3 million barrels a day of Chinese capacity offline. Consequently, diesel buyers are losing supply from several export regions at once, leaving fewer alternative sources to fill the gap.
Gasoline Margins Ease as Driving Season Demand Fades
Gasoline margins have run around 180% above their five-year average, yet they have eased from their peak as seasonal demand fades. "People are traveling less, and the U.S. switches to its winter gasoline spec and higher ethanol blending at the pump," Santos explains. Diesel, by comparison, is heading into its strongest season as the Northern Hemisphere prepares for winter, and heating demand adds to an already tight distillate market. The seasonal relief now reaching gasoline buyers is therefore not extending to diesel.
U.S. Diesel Export Curbs Put Gasoline Output at Risk
U.S. refiners are running close to full capacity to capture strong diesel margins, with utilization around 98% and net diesel exports of about 1.2 million barrels a day, mostly to Europe and Latin America. Heavy exports have drained domestic supply, leaving U.S. diesel inventories near 108 million barrels against a five-year average of around 120 million barrels. Those low inventories have fed debate over restricting U.S. diesel exports. If the U.S. did restrict diesel exports, refiners could cut runs, a move Santos says "would also reduce gasoline output at a time when U.S. gasoline stocks are about 6% below the five year average."
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--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Bruno Santos, StoneX Brazil, Market Intelligence Analyst
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