U.S. diesel refining margins stay firm as Middle East supply risks persist

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US diesel margins steady

Highlights

U.S. diesel futures crack spread closes at $62.84 a barrel on Thursday, its highest since June 3, reflecting strong refining profitability.
WTI futures have dropped about 22% and ULSD futures over 9% since early June, indicating diesel's outperformance amid ongoing Middle East supply risks.
U.S. distillate fuel inventories are 106 million barrels as of June 19, about 12 million barrels below the five-year average, intensifying market sensitivity to disruption.

Diesel margins hold up amid supply strain

As reported by Reuters, the U.S. diesel futures crack spread, a key measure of refining profitability, settles at $62.84 a barrel on Thursday, its highest level since June 3, based on LSEG data. The spread measures the gap between U.S. ultra-low sulfur diesel futures and West Texas Intermediate crude futures.

Analysts say diesel markets remain tighter than crude markets, helping preserve refining economics despite recent progress in U.S. negotiations with Iran to end the war and reopen the Strait of Hormuz. Rory Johnston, founder of the Commodity Context newsletter, says oil market tightness is now concentrated in products rather than crude, making diesel a comparatively safer way to position for further upside.

He adds that Russian fuel exports remain very low because refinery damage from Ukrainian drone attacks is constraining supply further. Even so, diesel crack spreads have retreated from peaks above $90 a barrel in March, the first month of the Iran war, though the pullback is less severe than in crude.

Inventory deficit keeps market sensitive

Since the start of June, WTI futures have fallen about 22%, while ULSD futures have dropped just over 9%, underscoring stronger support for diesel than for crude. Traders remain cautious because tensions in and around the Strait of Hormuz continue even as some stranded ships leave the waterway.

A container ship is hit near Oman on Thursday, and the United Nations pauses efforts to guide vessels and seafarers through the strait. StoneX tells clients that diesel inventories are the tightest among refined products, leaving the fuel especially exposed to any renewed disruption in the Middle East.

U.S. distillate fuel inventories, made up mostly of diesel and smaller volumes of heating oil, stand at 106 million barrels as of June 19, according to Energy Information Administration data. That leaves stocks about 12 million barrels below the five-year average, reinforcing the supply tightness that supports refining margins.

In our earlier analysis of Chevron (CVX), we noted that the stock remained under broad selling pressure even as the company expanded its upstream portfolio with a new offshore stake in Greece and maintained stable operations in Venezuela. We also highlighted that technical indicators stayed bearish, pointing to a near-term consolidation range around $167.15–$173.47 despite supportive fundamentals such as a long dividend-increase track record.

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