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US Diesel-Gasoline Spread Could Rise Further in Winter: BI

OIL PRODUCTS

The current 27$/bbl difference between gasoline and diesel margins is near all-time highs but could spike to 40$/bbl or higher by February according to Bloomberg Intelligence.

  • Diesel supply in the US could be squeezed as stockpiles decline amid the need for power generation and heating and with considerably less supply from Europe. Diesel production from European refiners has fallen due to lack of Russian crude, hydrogen and power shortages.
  • The Jones Act also makes Gulf Coast diesel significantly more expensive.
  • The US Northeast diesel price differential to Gulf Coast is also likely to surge from the current 4$/bbl to over 10$/bbl.
  • Much of New England uses diesel for heating, and stockpiles are near 40-year lows and the region will likely need more supply for power generation to replace LNG diverted to Europe.
  • A higher inherent gasoline yield from US shale compared to Russian Urals or Arab Medium grades will likely help widen the gasoline-diesel spread. Gasoline inventory builds from a surge in supply would depress gasoline margins.


Source: Bloomberg Intelligence

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