Diesel Futures Slide After 4-Month High As Energy Markets Follow Europe Lower

Diesel futures are leading the energy complex lower Wednesday after reaching a fresh 4-month high Tuesday. U.S. futures continue to follow Europe’s lead as the gasoil contract is trading lower by around 2% this morning.

The pull of supply towards European markets searching for replacements from sanctioned or damaged refineries continues to be a major theme and is impacting markets across the East Coast with allocations being restricted as shippers send their excess across the pond rather than keeping their excess in the US.

Marathon reported more Planned Flaring at its Los Angeles area refining complex Tuesday, with work expected from today through November 21. That news seemed to help slow the big slide in gasoline basis values we’d seen over the previous week.

The IEA’s world energy outlook was released this morning, and highlights the growing challenges of energy and critical mineral security in a tense geopolitical environment. The report highlighted how increased demand in aviation and shipping are expected to keep oil demand moving higher over the next 5 years, while transportation fuel demand stays relatively flat, and power/heating demand for oil declines. The agency also referred to this as the “Age of Electricity” as rapidly increasing LNG, Solar and Battery capacity supports surging demand from rising incomes promoting more Air Conditioning, the rapid rise of data centers, and the much needed spread of clean cooking options to emerging markets. The report predicts that EVs will make up 25% of global car sales this year, but the path forward is murky as many countries are prioritizing energy security over climate goals.

OPEC’s monthly report painted a rosy picture for the global economy as trade-related uncertainties have been “contained” while fiscal and monetary policies globally are contributing to growth. The cartel held its demand estimates steady through 2026 but increased its supply estimates by 100,000 barrels/day thanks to ongoing increases from the U.S. Rose, Brazil, Canada and Argentina. OPEC & Friends saw their oil output decline by 73mb/day during the month as a large decrease in barrels from Kazakhstan and Iran, who are facing challenges with deliveries due to sanctions and drones, offset increases from Iraq, Kuwait and Saudi Arabia. That decline is a good example of how challenging the output targets made by the group actually are to hit.

We’ll see the EIA’s monthly update later this morning and the IEA’s monthly oil report tomorrow. The API’s weekly report is due out this afternoon, with the EIA’s weekly status report rounding out the data deluge tomorrow at noon.