US diesel prices hit record high ahead of peak harvest season

US Gulf Coast diesel prices reached an all-time high on September 1 amid tight global supplies, geopolitical tensions and record US exports. Platts assessed ultra-low sulfur diesel (ULSD) at $4.6973/gal, up 27.17 cents on the day and the highest level since assessments began in 2006.

One of the key drivers was Russia’s extension of its export ban on diesel, marine fuel and gasoil through September 30. Meanwhile, the US has been increasing shipments to the global market, with diesel and gasoil exports reaching a record 54.2 mln barrels in August, exceeding the previous July high by 7.6 mln barrels.

Strong exports are increasingly competing with domestic demand. US ULSD inventories have declined for four consecutive weeks, falling to 93.59 mln barrels as of August 21. At the same time, the approaching peak US harvest season is increasing seasonal diesel demand from the agricultural sector.

The situation is particularly tight in the Midwest, one of the country’s key agricultural regions. Distillate inventories fell to 27.7 mln barrels, 1.6 mln barrels below the five-year average, while regional production declined by 100 thsd barrels per day in the latest reporting week.

Escalating tensions between the US and Iran are adding further pressure by increasing the geopolitical risk premium in energy markets. With diesel prices at record highs and inventories declining, US farmers could face higher costs for harvesting and transporting the new crop.