The U.S. market for distillates has been crazy the past few months - especially in PADD 1 - and given all that's going on, it's likely to stay that way for months to come.
Inventories of ultra-low-sulfur diesel, heating oil and other distillates are at their lowest levels for this time of year since before the EIA started tracking them 40 years ago and diesel prices are in the stratosphere, all despite diesel crack spreads being in record-high territory - a strong incentive for refineries to churn out more distillate.
PADD 1 isn't just a leading consumer of distillates - it's pretty much tied with PADD 2 for the #1 spot - it's also the region most dependent on others for its supply.
As we said in the introduction to today's blog, the standout issue regarding the PADD 1 distillates market right now is that inventories are at a historically low level.
So the PADD 1 distillates situation is concerning, at least from the perspective of diesel and heating oil consumers there.
A few factors could be at play here, but one that stands out to us is the pull of distillates to Europe - for some obvious reasons.
For one thing, PADD 3 is highly dependent on the export market to balance, with over 35% of the total middle distillate production from their refineries going to foreign destinations.
https://rbnenergy.com/why-whats-throwing-the-distillates-market-out-of-whack
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