U.S. ultra-low-sulfur diesel futures slid 4% on Wednesday following a published report that the White House was preparing a plan to bar diesel exports for 90 days, a report later denied by the administration. The October futures contract was last trading at $4.7437 a gallon, down 4% after earlier plunging more than 6%.
Average U.S. diesel prices remain near record levels, approximately $6.52 a gallon according to AAA, placing pressure on sectors that depend heavily on the fuel, including farming, transportation and other industrial users.
Conflicts in Iran and Ukraine have sharply reduced exports from several major producers, including Russia, Saudi Arabia and the United Arab Emirates, tightening global diesel flows. U.S. diesel inventories have also fallen, standing at less than 97 million barrels - roughly 13% below the seasonal five-year average - a factor commonly cited in price strength.
A White House official said the report that the U.S. was considering a flat, temporary export ban was not correct. At the same time, former President Trump said on Tuesday that he backed a ban on diesel exports, and Republican candidates in some of the tightest election races in November had urged the measure as a means to restrain record fuel costs.
U.S. Energy Secretary Chris Wright cautioned that an outright ban on diesel exports would not work and could elevate prices for gasoline and jet fuel. Wright said the administration is pursuing work with the refining industry to raise the supply of U.S. diesel through "a simpler, voluntary, cooperative fashion, without using blunt instruments that would reduce refining throughput." He added that any plan would be voluntary. He did not detail that plan and said no decisions have been made.
Analysts warned that a ban would likely lift diesel prices globally while lowering domestic diesel prices and eroding U.S. refining margins. The market reaction to commentary about a potential ban was immediate: European diesel refining margins rose to a record high on Wednesday after Mr. Trump's remarks.
Market participants and analysts also noted potential operational responses. A ban on exports could prompt refiners to cut crude runs, which would reduce output of gasoline and other refined products and could put upward pressure on those fuel prices. Traders and analysts flagged this chain of effects as a complicating factor for fuel markets.
Separately, U.S. Interior Secretary Doug Burgum said earlier this month that prohibitions on oil, gasoline or diesel exports could invite retaliatory measures from other countries, which in turn could harm consumers in states that rely partly on energy imports, such as California.
Market snapshot
- October ultra-low-sulfur diesel futures: $4.7437 per gallon, down roughly 4% on the day after larger earlier declines.
- Average U.S. pump diesel price: $6.52 per gallon (AAA).
- U.S. diesel inventories: under 97 million barrels, about 13% below the seasonal five-year average.