US distillate exports surged to a record last week as global supplies tightened. Disruptions across the Gulf area and various surrounding maritime chokepoints, as well as Ukrainian one-way attack drone strikes that have paralyzed portions of Russia's energy infrastructure, have been a major boon for US refiners and export terminals along the Gulf of America.
To begin the week, Samantha Dart, co-head of global commodities research at Goldman Sachs, told Bloomberg TV, "The situation in Russia is really one thing that worries us a lot."
Dart warned, "I'd say on the oil side, as I mentioned before, diesel, I think is the oil product that is most vulnerable right now, not just because you have your seasonal demand strength ahead just in the winter, but on the supply side. And to your point in the beginning, it's not just that you run war, it's what's happening to the Russian refineries as well. And Russia is usually a pretty big exporter of diesel. And now they have restricted it."
Last month, Goldman analyst Daan Struyven warned that "Diesel is at the epicenter of the supply squeeze."
As global supplies dwindle, US energy exporters on the Gulf of America emerged as the winners, shipping a record 1.9 million barrels to overseas customers last week.
Shipments have exceeded 1.5 million barrels a day for five consecutive weeks, with recent cargoes heading to northwestern European ports - the epicenter of a global diesel shortage caused by Gulf area refinery disruptions through Hormuz and Ukrainian attacks on Russian refining capacity.
The trade-off from surging diesel exports is that US distillate stockpiles have fallen to their lowest seasonal level since 1996, raising the risk of a tighter domestic market heading into the fall demand surge.
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Let’s not forget that Saudi Aramco CEO Amin H. Nasser warned that even if the Strait of Hormuz were reopened today, it could take up to 18 months to replenish global inventories.
All told, America is once again rescuing Europe from a deepening energy crunch - first LNG - this time diesel. You're welcome.