Report · Refining & products · Oil markets
Crude Is Returning. Diesel Isn’t: The Distillate Bottleneck in Global Oil Markets
By October 2026 Middle Eastern crude exports had almost returned to pre-conflict levels, while refined-product supply remained severely impaired. This report examines why diesel has outperformed crude and what it would take for the premium to close.
Co-authored with Benjamin Lozovsky and Michael Wu.
In the published version, the sections on why diesel has outperformed crude and on the replacement requirement are credited to Benjamin Lozovsky.
Full report: 16-minute read.
The value of diesel over crude almost tripled · US$ per barrel
New York Harbor ultra-low sulphur diesel less Brent, on a common volume basis, using monthly average spot prices.
EIA spot prices; 6:05 Markets calculations, as published in the report.Summary
The report’s central view is that diesel supply would normalise more slowly than crude exports, keeping middle-distillate margins elevated while refining and delivery constraints persisted. In September 2026, crude and condensate exports from the Middle East, excluding Iran, reached 99.4% of their pre-conflict level, while regional fuel exports remained below half. Reuters reported more than 2.3 million barrels a day of refining capacity offline.
Our base case was uneven relief. More crude and better shipping would let functioning refiners lift output before repairs were complete, while emergency diesel releases cushioned the shortage. That would keep margins high without implying that diesel prices had to rise further.
In the base case we expected the New York Harbor diesel crack to hold near US$90 a barrel, and ultra-low sulphur diesel to average around US$4.50–4.75 a gallon over the following three to six months, a modest fall from the spot price of US$5.07 on 14 October.
- 99%
- Middle East crude exports in September 2026 against pre-conflict levels, excluding Iran
- Under 50%
- Recovery in Middle East fuel exports over the same period
- 2.3 mb/d
- Regional refining capacity reported offline
- −12%
- US distillate stocks against their seasonal five-year average, 2 October 2026
Sources: Reuters/Kpler, 12 October 2026; EIA Weekly Petroleum Status Report, 7 October 2026. Refinery capacity represents outages, not necessarily lost output.
Key findings
Diesel rose faster than crude. In September 2026 the New York Harbor diesel-minus-Brent indicator averaged US$93.99 a barrel, against US$34.15 in February. These are monthly spot-price comparisons, not executable quotes.
Refining, not crude, was the missing variable. The IEA estimated an August net diesel-export shortfall from the Gulf and Russia of 1.6 mb/d against February. At distillate yields of 30–35%, replacing that through refining alone would take 4.6–5.3 mb/d of additional crude throughput.
Emergency stocks help in proportion to how fast they arrive. A 20 million barrel reference volume covers 62.5% of the August export gap if delivered over 20 days and 10.4% over 120 days. The schedules are illustrative, not official delivery plans.
The regional picture mattered more than the national total. US East Coast distillate stocks were 21.5 million barrels in the week ending 9 October 2026, against 27.7 million a year earlier.
A bottleneck is not, on its own, a mispricing. The report states that a trade would still need current quotes, forward expectations, costs and an attractive entry price.
Views and outcomes
0 assessed · 1 still open
None so far.
New York Harbor ULSD spot (EIA)
Entry 5.102 US$/gal ·
Target avg 4.50–4.75 US$/gal ·
Prices auto-refresh on weekdays; dates show the observation. Forecasts are assessed at their due dates; averages use the full period.
Methodology and benchmark notes
Every published call and dated base-case benchmark view is included, including misses. Duplicate calls appear once. Entries are publication references, not executed trades. Moves are price changes, not forecast verdicts. Brent uses front-month futures. Related spot or indicative points are chart context; outcomes use the stated benchmark. Daily and weekly sources keep their actual observation dates.
New York Harbor diesel to average US$4.50–4.75 a gallon from 18 January to 18 April 2027.
What would change the view
Would weaken the view
- Delivered diesel volumes rise, East Coast stocks move back towards their seasonal average and the New York Harbor diesel-minus-Brent spread narrows, all at the same time.
- Refinery repairs proceed faster than assumed, so global refining capacity normalises sooner and crack spreads narrow.
- Diesel supply meets demand without further inventory draws, which the report calls the clearest sign that its view is wrong.
Would strengthen it
- Diesel deficits continue even as crude availability improves.
Conditions as set out in the report when it was published.
From the report
| Illustrative delivery period | Average diesel flow | Share of August export gap |
|---|---|---|
| 20 days | 1.00 mb/d | 62.5% |
| 60 days | 0.33 mb/d | 20.8% |
| 120 days | 0.17 mb/d | 10.4% |
Bars share one scale within each column, starting at zero.
Fixed reference volume of 20 million barrels at a constant illustrative delivery rate, with no allowance for transport or grade constraints. The 1.6 mb/d export gap is an August benchmark, not an estimate of October’s shortage.
Source: 6:05 Markets calculations, as published in the report.
Data and approach
The analysis distinguishes figures for different periods and parts of the supply chain. Export losses, refinery throughput and damaged capacity overlap, so they are not added together. Replacement calculations show sensitivity to assumptions rather than a reconciled supply forecast. Price scenarios are conditional outcomes without assigned probabilities.
Sources
- Reuters, 12 October 2026
- IEA, Oil Market Report, September 2026
- EIA, Weekly Petroleum Status Report, 7 and 15 October 2026
- EIA, Short-Term Energy Outlook, October 2026
- Columbia Center on Global Energy Policy, 28 August 2026
- IEA Governing Board statement, 15 October 2026
Read the full report for the complete analysis.
Read the full report at 6:05 MarketsDated analysis from 18 October 2026. Views and price ranges reflect the information available at the time and have not been updated. Nothing here is investment advice.