RFS Island Turns into Diesel Island
The move toward a 90-day U.S. diesel export ban follows the direction I had anticipated, although implementation remains unconfirmed. October heating oil fell 16.57 cents to $4.7764/gal, while December lost only 3.18 cents to $4.5171/gal, compressing October–December backwardation from 39.32 cents to 25.93 cents/gal, a 34.1% contraction. Europe moved in the opposite direction: October ICE gasoil gained $56.25 to $1,485.25/mt, while January gained $27 to $1,286/mt. October–January backwardation consequently widened from $170 to $199.25/mt, an increase of 17.2%. The calendar intervals differ, but the regional divergence is measurable: 13.39 cents/gal less nearby premium in America and $29.25/mt more in Europe. The domestic supply argument also has numerical support: EIA reported a roughly 400,000-barrel distillate inventory draw despite 94% refinery utilization. At an assumed export rate of 2 million barrels/day, a 90-day restriction would retain up to 180 million barrels before changes in production or trade flows.
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