Diesel Crack Spreads Hit Record as Export Curbs Widen

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Diesel crack spreads hit record highs, with the U.S. heating-oil crack near $117 a barrel, as China halts fuel exports and Russia extends its diesel ban.

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The diesel crack spread, the premium of diesel futures over the crude oil used to make it, has reached record levels as the world's two largest fuel-export swing suppliers pull back. The U.S. heating-oil crack, the benchmark for diesel margins, climbed to roughly $117 a barrel on September 16. Moscow has since extended its diesel export ban through October 31, and Beijing has told major refiners to hold back most October cargoes. In early October, New York Harbor ultra-low-sulfur diesel futures were near $4.60 a gallon, leaving the spread over Brent above $90 a barrel. Normal conditions put the spread at roughly $20 to $30.

Why Are Diesel Crack Spreads at Record Highs?

Diesel spreads are at records because the shortage is in refined product, not crude. Nymex heating oil futures jumped 6.1% on September 15 to their highest settlement since records began in 1986, and European gasoil futures rose 6.2% to a record in data dating to 1989. The following morning, the U.S. heating-oil crack spread reached about $117.

Two shocks are driving the move. Middle Eastern diesel exports have been compromised by the conflict involving Iran and the disruption to Gulf shipping. Ukrainian drone strikes have also knocked out a large share of Russian refining capacity. Diesel inventories are at record seasonal lows heading into the Northern Hemisphere winter, when heating and trucking demand rises together.

How Are China and Russia Tightening Supply?

China and Russia are tightening supply by shifting from exporting fuel to rebuilding their own stockpiles.

Russia extended its diesel and marine fuel export ban for all producers through October 31. The ban had covered only traders and small refiners until July, when it was widened to every producer, and it was due to lapse on September 30. Three of Russia's six largest diesel refineries, Kirishi, Volgograd and NORSI, are shut or running at about a quarter of capacity after drone attacks. Those six plants account for roughly half of national output. Russia's jet fuel export ban runs to November 30, and its gasoline export ban is set to last at least until January.

The loss is large. Russia typically supplies about one in every nine barrels of diesel traded globally. Its diesel exports fell below 1 million tonnes in June, against roughly 2.5 million tonnes a month a year earlier, and Turkey and Brazil lost at least half of their prior cargo allotments.

China is following a similar path. PetroChina (0857.HK) cancelled gasoline and jet fuel cargoes planned for October, and Zhejiang Petrochemical scheduled no exports during the National Day holiday. Beijing has not yet authorized October exports outside Hong Kong and Macau. Exports could resume after October 7, depending on domestic conditions. China's diesel inventories are about 20 million barrels below pre-conflict levels, and gasoline stocks are about 9 million barrels short of the government's restoration target. The suspension follows a strong stretch: August product exports reached 6.01 million tonnes, up 12.7% from a year earlier and the highest since March 2024.

What Does This Mean for U.S. Consumers and Policy?

For U.S. consumers, the result is the highest diesel prices on record. The national retail average reached $6.53 a gallon in the week of September 22, according to AAA, 77% above the prior year. Diesel moves freight, farm equipment and construction, so higher costs feed into goods prices with a lag.

The spike has become a political issue. Senate Majority Leader John Thune said he was open to exploring a U.S. diesel export ban. President Donald Trump later said he favored keeping domestic diesel at home, and Representative Tim Burchett introduced two bills on the subject. Energy Secretary Chris Wright opposed the idea. U.S. refineries produce about 5.3 million barrels a day of distillates against domestic demand of about 3.6 million, so the surplus supplies export markets that now have few alternatives.

Market participants broadly view an American export ban as likely to backfire. It could deepen the global shortage and push prices higher, while hurting the U.S. refining complex without delivering the intended relief. Other options under discussion are extending the Jones Act waiver, which expires November 15, and temporarily waiving renewable fuel requirements, which could trim 10 to 20 cents a gallon.

What Comes Next for Diesel Prices?

Diesel prices are likely to stay volatile through the end of October, with three developments setting the direction.

• Whether Moscow renews its ban beyond October 31. Refinery repairs will take time, and the winter heating season raises domestic demand.
• Whether Beijing authorizes export quotas after the holiday. A resumption would ease some pressure, while an extended halt would keep the Asian market short.
• Whether Washington restricts exports. Any move would reshape trade flows in Europe and Latin America, which depend on U.S. Gulf Coast cargoes.

The spread has stayed well above $90 a barrel even after retreating from its peak, which indicates the market still prices acute scarcity. Normalization would require some combination of restored Russian refining, reopened Gulf export routes and rebuilt inventories, none of which is expected within weeks.

Outlook

Record diesel crack spreads reflect a refining and logistics squeeze rather than a crude supply gap, and export restrictions by China and Russia have compounded it. Russia's ban runs to October 31, China's decision on post-holiday exports is pending, and the U.S. export debate remains open. Through the winter, refiners with spare distillate capacity benefit from wide margins, while freight, agriculture and heating-oil users carry the cost.