Sometimes when you get a crack high you might not see things so clearly.
Overnight we’re looking at another diesel crack blowout as the market prices in the threat of new or extended export bans from Russia, China, and even the United States. The Gulf Coast diesel crack has been ripping through levels that used to be unthinkable — north of $100 a barrel earlier this month and, by some prints, pushing toward that $118 area traders are talking about. Asian 10-ppm diesel cracks just printed an all-time high a little over $87 a barrel. That’s the kind of number that gets Washington’s attention.
The squeeze is real. Russia — historically the world’s No. 2 diesel exporter after the U.S. — already banned producer exports through the end of September after Ukrainian drone strikes hammered refineries. Vedomosti reported this morning that Moscow has decided to extend those restrictions through the end of October. Before the bans and the attacks, Russian diesel loadings were running in the 800,000-barrel-a-day neighborhood in 2025; they collapsed to a few hundred thousand barrels a day once the restrictions hit. Take that volume off the water and every cargo from the U.S. Gulf and Asia suddenly looks a lot more valuable.
China is the next shoe. State-refiner stocks just hit their lowest since 2022 and diesel inventories are at a 15-month low. Analysts at Energy Aspects are already flagging the risk that Beijing slashes monthly clean-product export quotas toward 1.2 million tons in the fourth quarter to protect the home market. That’s on top of the spring curbs they slapped on when the Iran war first tightened crude.
And then there’s us. show U.S. distillate exports running 1.5–1.9 million barrels a day this summer — record territory. The week of August 7 hit 1.935 million bpd. We are the world’s largest diesel exporter. When Europe, Latin America, and Africa can’t get Russian barrels, they come shopping in the Gulf. That’s why inventories here keep getting drawn even as refiners run hard.
Enter Representative Tim Burchett. On the House floor and in a video circulating yesterday he said refiners normally make about $15 a barrel — call it 35 cents a gallon — when times are good. Right now, he said, they’re making $117 a barrel, or $2.78 a gallon. That’s nearly an 800 percent jump, and he called it gouging. His line: keep the fuel here. Senate Majority Leader John Thune said the same day he’s “open to exploring” a diesel export ban if it would take pressure off prices. Midterms are seven weeks away. Record $6-plus diesel at the pump concentrates the mind.
Could an export ban actually raise prices in the United States — or help trigger a global recession? History says be careful.
Ban the exports and Gulf Coast refiners lose the highest-value barrel. They cut runs or shift the slate away from diesel. Global prices go even higher because the rest of the world just lost its swing supplier.
Those higher world prices leak right back into U.S. rack and retail prices. You also lose the incentive to keep investing in the very capacity that would eventually ease the squeeze. We’ve seen this movie: windfall-profits rhetoric in the 1970s and after 2008 meant the investments that would have fixed the supply problem never got made.
That also raises the question of whether Fed Chairman Kevin Warsh should be hiking into a global diesel crisis. In the past, rate hikes piled on top of an oil or product spike have done more damage than the price of oil itself. High prices are already rationing demand and pulling every available barrel toward the market. Sometimes it takes high prices to cure high prices.
Especially after the oil and diesel industry spent years fighting a war against the green-energy elitists and Great Reset crowd that tried to shut the diesel industry down. Now a lot of the same Democrats who said higher prices were acceptable if it “saved the planet” are discovering climate change is no longer an existential threat the minute they see a political opening at the pump. The part that said it was okay to see higher prices to save the planet doesn’t play as well when the farmer, the trucker, and the home-heating customer are the ones paying the bill.
Keep an eye on the official Russian announcement, any Chinese quota language, and whether the export-ban talk in Washington is campaign-season theater or actual legislation. The crack is telling you the market is tight. Policy that pretends otherwise usually makes it tighter.
And oil prices which are also high may be backing down because the Houthis backing down? After trying to take control of the Bab el-Mandeb Strait, reports say the Houthis told the U.S. they remain committed to the 2025 ceasefire — and that is the whole game right there. In other words the rebels realized that the United States could end them quite quickly if they chose to do so.
The Houthi’s just rolled down Yemen’s Red Sea coast, grabbed Mocha, Perim Island, and the Hanish islands, and now sit on one of the world’s most important shipping chokepoints. Then they turn around and say, “Relax, navigation is normal, we have no intention of closing the strait,” and whisper to Washington that the May 2025 deal still holds: we don’t shoot at American ships, you don’t bomb us. That is not backing down. That is them trying to lock in the ground they just took without bringing the U.S. Navy back into the fight. Traffic through Bab el-Mandeb is already thinner, insurers are nervous, and Saudi-linked vessels are still in the crosshairs. So the Houthis get the leverage, oil markets stay on edge, and everybody pretends the ceasefire is still the story. Watch the barrels, not the press releases.
Still, on the flip side, Hormuz is telling a different tale. According to reports, oil flow through the Strait of Hormuz continues to climb, now with daytime transits back in the mix. The seven-day average of oil moving through Hormuz rose to nearly 12 million barrels a day as of Sunday — easily the fastest pace since that post-MOU June-July breakout — and this time there is virtually no Iranian crude in the mix. That should be a relief. And if we can continue to see those numbers rise through the Strait of Hormuz it should ease some of
The crude supply worries but of course it’s not gonna build a refinery overnight.
It isn’t, not completely free flowing news. Javier Blas at Bloomberg reports that physical oil prices in the North Sea and Mediterranean have surged as some refiners scramble to replace prompt Saudi barrels lost after the East-West pipeline was hit. Forties crude is now trading $15 a barrel over , compared with just 50 cents a barrel in early September.
We’re definitely catching a lot of momentum trades here in the short term 1 of the things that we’ve said since the beginning of the conflict it’s a diesel crack spread is telling the story and that’s where most of the risk has been still if we can reopen the Strait of Hormuz if Russia and Ukraine agree to stop hitting energy infrastructure and if China does not put on the rumored export ban and if the US keeps the diesel flooring we could see the crisis moderate in the coming days if not get ready for a wild ride it could lead to demand destruction.
is getting a little bit of a boost this morning, with the October Nymex contract hovering around $2.93 after settling at $2.919. That’s a modest lift after two sessions of gains, and the market is still trying to decide whether this is just a bounce off the lows or the start of a weather-driven grind higher.
Fox Weather is pointing out that we have to keep an eye on the Atlantic. This hurricane season has started off with a historically quiet stretch: five named storms and zero hurricanes so far. In the satellite era, this is the latest the basin has gone without a hurricane — past the climatological peak of September 10. El Niño and record wind shear have been the main suppressants. But Fox Weather’s Bryan Norcross and others keep making the same point: the season is not over, and late September into October is when Florida and the Gulf often see the homegrown systems. It only takes one.
Right now the National Hurricane Center is watching a trough about 600 miles east of Bermuda. Development odds are still low — about 10% in 48 hours and 30% over the next week — and the system is not a U.S. threat at this point. Still, if it organizes it would be Fay, and any late-season tropical activity in the Gulf or off the Southeast coast is what gas traders actually care about: production shut-ins, platform evacuations, and a sudden drop in Gulf supply. A quiet season so far has been a tailwind for storage refill. A storm that actually hits the producing region flips that script fast.
On the weather-for-gas side, this is classic shoulder season. Cooling demand is fading, heating demand hasn’t really shown up yet, and the models are split. The GFS has been advertising a colder shot into the Midwest after the 23rd; the European model is milder. That disagreement is why the bounce in gas is cautious instead of explosive. LNG feedgas remains firm — flows to the big export plants have been running in the high 17s to around 18 Bcf/d so far in September — so the export bid is still there even if domestic weather is mixed.
Bottom line: gas is off the floor because production has eased a bit, LNG is pulling, and the market is starting to look past this historically quiet Atlantic. Fox Weather is right to flag that the season can still change. Until we get a real hurricane or a convincing early-season cold shot, $3.00 is resistance, not a magnet. Watch Bermuda, watch the Gulf, and watch those late-September model runs.
