Refining Shortage Drives Diesel Prices to Record High

Crude oil prices have been on a steady rise, adding 1.6% on Monday to trade just under $91.00 per barrel. However, despite the increase in crude oil production, diesel fuel remains scarce, with distillate stocks sitting at their lowest seasonal level since 1951 and 14% below their five-year average.

The recent attacks on Saudi Aramco's Jizan refinery, a 400K barrel-a-day plant, are likely to exacerbate the refining shortage. The facility was hit again on Monday, with damage being assessed and the company not commenting yet. The weekend saw American strikes on Iranian vessels, and Tehran is preparing to declare a restricted shipping zone in the Gulf.

Meanwhile, United States commercial Crude Oil inventories sit about 1% above their five-year average, while distillate stocks are at a record low. Gasoline is also scarce, with supplies 17% below their record level. The New York Harbor diesel crack against the barrel reached $107 on September 1, and retail diesel prices have printed an all-time high of $5.85 a gallon.

OPEC+ has paused its output increase, but this may not be enough to address the refining shortage, as most spare capacity is located within the Gulf region. The group's decision to leave October output unchanged after six consecutive months of increases is seen as an attempt to stabilize prices and prevent further escalation in the Middle East.