A potential US ban on diesel exports could boost domestic supplies but would likely have broader consequences, including refinery run cuts, higher global fuel prices and tighter supplies of other petroleum products, S&P Global reported Wednesday, citing analysts and industry watchers.
The US is a structural diesel surplus producer, with refineries producing about 5.3 million barrels per day of distillates against domestic demand of roughly 3.6 million b/d, GasBuddy said. Exports effectively provide an additional outlet for that surplus. S&P Global analysts estimate an export ban could strand as much as 1.5 million b/d of diesel in the domestic market, rapidly weighing on diesel prices and refining margins.
Refiners cannot simply stop producing diesel while maintaining current gasoline output. To reduce diesel production, they would generally need to process less crude, cutting output of gasoline, jet fuel and petrochemical feedstocks as well. S&P Global estimates refiners could ultimately need to cut crude runs by nearly 1.9 million b/d, or about 12%, pushing utilization toward 80%-82%.
The disruption would come as global diesel markets are already tight because of refinery outages in Russia and the Middle East, lower Chinese exports and seasonally low inventories. US Gulf Coast diesel cracks were near record levels Sept. 22. Major Gulf Coast refiners rely on export markets to absorb excess production, while renewable fuel producers could also face divergent effects depending on their access to overseas markets.
Refiners could adjust their crude slates to reduce diesel yields without making such deep cuts to refinery runs. However, some analysts oppose an export ban, arguing that it could undermine the US reputation as a reliable energy supplier while doing little to lower gasoline prices. Others note that gasoline prices remain more visible to consumers and voters than diesel prices.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)