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The Perfect Storm Is Brewing In U.S. Diesel Markets


1. Threat of Railways Stike Highlights U.S. Energy Vulnerability

- The prospect of a nationwide railway strike pushed US natural gas futures up above 9 per mmBtu, amidst fears of coal-by-rail disruptions, underscoring the importance of gas in power generation.

- According to the US EIA, consumption of natural gas in the United States is set to rise to an all-time high of 86.6 bcf per day in 2022, amidst retirements of coal-fired power plants.

- Considering that the railway-unions deal is still tentative, a resurfacing risk of strikes would lift Henry Hub futures again as 70% of all coal deliveries to US power plants are handled by rail.

- September is usually the month with some of the largest weekly builds in gas stocks before the winter kicks in – an emergency gas generation ramp-up might disrupt gas injection rates, adding another layer of pressure on prices.

2. Middle East Makes Claim for Europe’s Diesel Market

- According to Reuters, the Middle East is poised to become the largest diesel supplier to Europe as regional buyers are preparing for the onset of EU sanctions on Russian products in February 2022.

- The combination of extremely low middle distillate stocks and remarkably healthy diesel cracks, still around $50 per barrel despite the recent price drop, makes Europe a coveted destination.

- Europe’s imports of diesel have been increasing in September so far, moving up to 1.65 million…

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