Refinery Disruptions And Strait Closures Fuel Diesel Rally

Energy futures are up again this morning with the ULSD contract leading the way higher with 3.2% gains. Monday’s truce-that-wasn’t is being pointed to as the source of this morning’s renewed bullish sentiment: Ukraine and Russia both expressed acquiescence yesterday to a proposed infrastructure-centric ceasefire, aimed at limiting military strikes on each country’s energy networks. A market that had been buying diesel on every headline for two weeks spent Monday deciding whether Russian refineries were about to stop burning, and that indecision was quite visible in the 30 cent trading range distillate futures ‘enjoyed’ during yesterday’s formal session.

Turns out they weren’t. Kyiv struck Rosneft’s 170 mbd Syzran refinery this morning, a popular target that has now been hit eleven times since 2024. It was also reported that a Ukrainian port in Odessa and a drone-control logistics center were struck in retaliation.

ExxonMobil’s Joliet 252mbd refinery reported heavy flaring and a full site shutdown after experiencing a power outage Sunday afternoon. Power has since been restored but a system restart has yet to being as unit evaluations are carried out. Diesel prices in the Buckeye Complex, the Chicago region’s hub. jumped 20 cents against the screen on the news.

The Strait of Hormuz remains effectively closed, with Monday’s ship traffic reported at a dismal four transits, according to Kpler. Gulf states have postponed their talks with Iran aimed at a potential shipping deal. The UN Security Council will meet this afternoon to discuss the Bab el Mandeb Strait, one of the Hormuz alternatives that was recently taken over by the Iran-backed Houthi rebels.