Locator: 51727DIESEL.
Locator: 51727PERMIANGAS.
RBN Energy: with US refiners already running hard, relief on diesel remains elusive. Link here. Archived. See also this link
-- the chokepoint is not storage facilities (they are empty in many
cases) but rather the pipelines, trucks, and rail. The latter
(pipelines, trucks, rail) are maxed out and can't handle much more
diesel in the areas where they need it most.
A
$100/bbl diesel crack spread is an incredibly strong market signal, but
it doesn’t translate to higher refinery output because most U.S.
refiners already operate at or near their practical limits. As global
supply disruptions drain inventories and foreign buyers pull more
barrels from the U.S., diesel prices have surged even as domestic
refinery runs remain near historic highs. In today’s RBN blog, we look
at why high crack spreads don’t necessarily increase a refinery’s
output, how market disruptions elsewhere can drain U.S. inventories, and
the indicators that will help tell us whether the diesel squeeze is
easing (or worsening).
As we noted in Part 1
of this mini-series, 2026 will be remembered by some as the year that
diesel cracks topped the century mark ($100/bbl) for the first time. On
August 17, the U.S. Gulf Coast diesel crack spread (vs. WTI Cushing)
surpassed that sky-high level. On Monday, September 1, 2026, the diesel
crack closed at $103.29/bbl, the highest close on record, before
reaching a record high intraday price the following day of $108.02/bbl.
As of publication, the diesel crack soared even higher, closing at a new
record high of $107.72/bbl on September 10. It’s important to note that
global crude markets are not terribly short of crude in the traditional
sense (despite various geopolitically driven constraints). Instead, the
world is struggling to refine enough crude oil into middle distillates
to satisfy demand. U.S. distillate stocks in August were on track for
their lowest end-of-month level since April 2005 and were the lowest for
the month since 1951.
A
crack spread measures the difference between the value of refined
products and the crude oil used to produce them. A $100/bbl headline
diesel crack (the right end of the orange line, measured against the
left axis in Figure 1 below) does not mean a refinery earns $100/bbl in
net profit.
First and foremost, U.S. refiners and
importers currently incur approximately $15 in RVO/RIN compliance costs
for every barrel of diesel sold domestically. That cost is passed
through 100% into the domestic diesel price. The headline crack
therefore includes the full RVO/RIN cost—an amount the refinery must
spend on compliance rather than retain as margin. To calculate the
effective crack spread, the entire RVO/RIN cost per barrel of diesel
must be deducted:
Effective diesel crack = Headline diesel crack − RVO/RIN cost per barrel of diesel.
Thus,
a $100/bbl headline crack less than a $15/bbl RVO/RIN cost yields an
$85/bbl effective crack (still a historical high value), before
operating costs and other expenses. The same distinction explains why,
on a comparable basis, U.S. diesel exports to Latin America typically
sell at a discount to domestic diesel equal to the RVO/RIN cost:
exported barrels do not carry that domestic compliance obligation.
In
addition, refiners still have operating expenses, transportation costs,
financing costs, hedging effects and the economics of the other
products produced by the refinery. Instead, it means that the market
value of diesel relative to crude has become extraordinarily high. If
crude (blue line and left axis) is expensive because the world is short
of barrels, crude prices should be doing most of the work. But when
diesel prices (green dashed line and right axis) rise dramatically
relative to crude, the problem is further downstream.
**************************
RBN Energy: Summit's Double E expansion. Link here. Archived.
Summit Midstream is moving full speed ahead with the 900-MMcf/d
expansion of the Double E Pipeline after it secured about 550 MMcf/d of
long-term commitments to move natural gas from the Permian’s Delaware
Basin toward the Waha Hub. The company reached a final investment
decision (FID) on the project, designed to address growing Permian
natural-gas production and rising demand from Gulf Coast LNG export
facilities, after a successful open season. In today’s RBN blog, we’ll
discuss what the expansion means for Permian producers and regional gas
flows.
When
it comes to the Permian, there’s a lot to discuss as it pertains to
natural gas. Production in the basin has risen substantially over the
years and should continue to grow, supported by crude prices, while
pipeline capacity constraints have kept spot gas prices low. That higher
production is partly because the region’s gas-to-oil ratio (GOR) has
steadily moved higher. As we noted in Hold On … I’m Comin’,
the Permian’s GOR has increased from about 3.4:1 to 4.2:1 over the past
10 years, a trend that appears likely to continue. In addition, the LNG
terminals along the Gulf Coast have become the fastest-growing outlet
for Lower 48 natural gas, with export capacity now about 18.3 Bcf/d and
on track to approach 30 Bcf/d by 2030, much of it supplied from the
Permian Basin.
The Double E expansion is intended to
address those issues. The pipeline, which
was constructed in 2021 and runs from the Eddy-Lea county line in New
Mexico to delivery points in and around the Waha Hub in Pecos County,
TX, has been an important route for moving Permian gas since its
startup. The 135-mile system is 70% owned by Summit Midstream and 30% by
an ExxonMobil subsidiary, with Summit Midstream Permian II LLC serving
as operator. It runs near ~30 processing plants with a combined capacity
of roughly 10 Bcf/day.
