U.S. refining margins hit records as fuel shortages tighten domestic market

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U.S. refining margins hit records

Highlights

U.S. benchmark 3-2-1 crack spread rises over 2% to a record $69.66 per barrel on Thursday, hitting a third consecutive all-time high.
Global diesel shortage driven by Iran war and Russian export ban pushes U.S. diesel crack spread to a record $91 per barrel despite a 4.5 million barrel stockpile increase.
U.S. gasoline inventories drop over 1.5 million barrels to 210.5 million barrels, marking the lowest midyear level since 2012 and pushing average prices to $3.95 a gallon.

Record margins driven by diesel and export disruptions

As reported by Reuters, the benchmark 3-2-1 crack spread, a key measure of U.S. refiner profitability, rises more than 2% to settle at $69.66 a barrel on Thursday, marking a record high for a third straight session.

U.S. refiners are among the main beneficiaries of disruptions tied to the Iran war, as overseas buyers compete for cargoes and drive U.S. fuel exports to record levels. That export pull is tightening domestic availability even as refiners use the New York Mercantile Exchange crack spread to hedge margins.

Diesel remains the biggest support for refining economics. Supply has stayed constrained for years after refinery closures in the West, and the loss of Middle Eastern exports during the Iran war, followed by a temporary Russian export ban announced this month, deepens the global shortage.

U.S. diesel stockpiles rise by 4.5 million barrels last week to more than 102 million barrels, but they still stand nearly 11 million barrels below the February 27 level and about 8 million barrels under the five-year seasonal average, according to U.S. Energy Information Administration data released on Wednesday. The diesel crack spread settles above $91 a barrel, also a record high.

Gasoline shortages add pressure on consumers

Gasoline is becoming a broader concern as U.S. and global refiners shift output toward higher-yield diesel and jet fuel. Since the start of the Iran war at the end of February, that imbalance pulls gasoline inventories down even faster than diesel and adds to price pressure for drivers.

U.S. gasoline inventories fall by more than 1.5 million barrels to 210.5 million barrels in the week ended July 10. Stocks are down more than 42 million barrels from the week ended February 27 and sit about 14 million barrels below the five-year seasonal average, the EIA data show.

The gasoline stockpile is the lowest for this point in the year since 2012. National average retail gasoline prices stand at $3.95 a gallon on Thursday, up nearly 80 cents from a year earlier, according to GasBuddy, after peaking at as much as $4.56 a gallon in May during disruptions linked to the blockade of the Strait of Hormuz.

Higher pump prices are one of the most visible inflation signals for U.S. consumers and create political pressure for President Donald Trump, who accuses oil companies of price gouging without providing evidence. Analysts say prices may need to rise further before refiners shift back toward maximum gasoline production, with independent oil analyst John Kemp saying stronger retail and wholesale gasoline prices, as well as improved margins relative to other fuels, are needed to encourage that change.

In our previous report on the Iran war’s impact on North America’s industrial metals market, we noted that disruptions around the Strait of Hormuz pushed U.S. aluminum prices, premiums, and transaction costs to record highs, with costs staying near peak levels even after a brief easing. We also highlighted that copper supply is expected to tighten further into 2026 as mine output remains flat while demand rises, increasing input-cost pressure for manufacturers and energy-transition industries.

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