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US Diesel Crack Reportedly Hits Record High Above $100 on Tight Fundamentals

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The US diesel product crack, or the price differential between US diesel and US West Texas Intermediate crude, reportedly exceeded the $100 a barrel mark on Monday, hitting a record $102.20 amid tightening supply and demand fundamentals.

"Global diesel supplies are extremely tight," said Pete Mento, managing director at Baker Tilly US Global Trade Advisory Services.

"Russian refining has been disrupted. Middle Eastern flows have been disrupted. Chinese refining is down. US distillate inventories are reportedly at their lowest August level since 1996."

Low refinery run rates, flow disruptions in the Middle East, and export restrictions in Russia have coincided with the peak agricultural demand, as the Northern Hemisphere enters the harvest season and the Southern Hemisphere enters the planting season, according to Reuters.

In the US, strong export demand resulted in inventory depletion despite an increase in diesel production as refiners take advantage of the high cracks, the news agency reported, citing Shohruh Zukhritdinov, chief executive at oil trading firm NitrolOil.

In the week ended Aug. 7, US distillate fuel inventories declined to 107.1 million barrels, data from the Energy Information Administration showed.

Global diesel markets could further tighten as the US vows to exert maximum economic pressure on Iran, potentially triggering sanctions against buyers of Iranian fuel, such as China.

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