European benchmark diesel futures spiked as much as 7% Tuesday to more than $200 a barrel, after President Donald Trump said he’d told his administration, “let’s not send out the diesel,” with analysts warning a full ban would be “quite catastrophic” for global supply before futures eased back amid skepticism the ban would actually happen.
The statement marks a sharp reversal from the White House’s April pledge that the U.S. would be a “critical lifeline” supplying the world with energy during the Iran conflict, and a U-turn from denials just days earlier that an export ban was under consideration, according to the Financial Times. Europe imported 506,000 barrels a day of U.S. diesel in August, per data firm Kpler, as U.S. refineries ran overtime to supply Latin America and Europe amid the global shortage. Eugene Lindell of FGE NexantECA warned global prices could climb to $350 a barrel, with Europe and Latin America — which he called diesel “the lifeblood of” — bidding against each other for the same barrels, and long-term supply contracts thrown into “legal chaos.”
Benedict George of Argus Media said a ban wouldn’t cause shortages at European gas stations, since the continent only relies on imports for 20% of diesel needs, but prices would still rise sharply given how “responsive” they are to import availability. He noted Europe has run refineries at full capacity and barely touched strategic reserves so far. The American Petroleum Institute warned a ban would remove roughly 20% of the 8 million barrels of diesel traded globally by sea each day, worsening the refining crisis it’s meant to solve. S&P Global estimated a ban could force U.S. refiners to cut output by nearly 2 million barrels a day (12%), pushing U.S. gasoline prices up by 25 cents a gallon in the process.
IAM Member Impact: European members are not expected to see physical shortages of diesel if a ban proceeds but should budget for a sharp price shock given how directly European diesel costs track import availability.
Source: Financial Times