Diesel Squeeze Deepens as Inventories Keep Falling

According to the EIA’s Weekly Petroleum Status Report (WPSR) released this morning, distillate inventories fell for a fourth consecutive week, dropping to just above 103 MMbbl (far right of green line in chart below), their lowest weekly level since the first week of June. Distillate stocks are on track for their lowest end-of-month level since April 2005, and this week marks the lowest inventories have been in the month of August since 1951. The latest draw was concentrated on the East Coast, where stocks have dropped to their lowest level since 2022. As discussed in the Crude Oil Billboard, refinery utilization remains near 98%, its highest level for this time of year since 1998. Refinery input was essentially flat with the prior week at 17.4 MMb/d, the highest level for this time of year since 2019. As mentioned in 'Running on Fumes',  refiners are already responding aggressively to exceptionally strong margins, but elevated production has yet to translate into meaningful inventory rebuilding. That disconnect is helping keep the diesel crack near record territory. The benchmark crack climbed above $97/bbl last week, more than triple year-ago levels and within striking distance of $100/bbl. Strong exports are adding another layer of pressure, pulling incremental barrels into an already tight global distillate market rather than allowing U.S. stocks to recover.