Seven Diesel Moves And Still One Refinery Short

Trump on Truth Social, Oct 9: Russia to supply over 300,000 tonnes of diesel immediately, 500,000 tonnes in November and 1 million tonnes thereafter. Same day, three industry sources: Trump to issue a directive using the Defense Production Act to increase oil and fuel production and bypass state and local rules blocking energy production. MMA: 71.5% of Gulf of Mexico oil output shut in ahead of a hurricane forecast to make landfall in Louisiana and Mississippi.

The seven moves: a threatened export ban; pressure on Europe to draw down its emergency diesel stocks; the G7 release and the IEA's accelerated release; a deferral of diesel taxes plus wider access to red diesel; the Defense Production Act; and Russian imports. Five of them redistribute or cheapen fuel that already exists. The Russian barrels come from a refining system under Ukrainian drone attack that still has its own producer export ban through Oct 31. At about 7.45 barrels a tonne, the first 300,000 tonnes is roughly half a day of US distillate demand. The Defense Production Act is the first measure aimed at the actual constraint: capacity. But it can't add refining in a quarter. Meanwhile six refineries run by Shell, Valero, Marathon, PBF and Chevron sit in the hurricane's landfall area. Gulf states hold about half of US refining capacity, and diesel inventories are at record seasonal lows with jet fuel near $5. Each policy move has produced a dip in prices without adding capacity.