(Reuters) – U.S. and European diesel prices rose sharply on Monday after attacks on refineries in Russia and Saudi Arabia added to supply disruptions, raising concerns for farmers in need of the fuel for the planting season in the Northern Hemisphere and harvesting season in the Southern Hemisphere.
The U.S. ultra-low sulfur diesel futures contract rose 7.4% to settle at $4.19 a gallon on Monday, the biggest gains since July 13. European diesel refining margins, measured as the difference between the price of fuel and the cost of crude oil, rose nearly 10%.
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The surge followed confirmation of an attack by Ukraine on a refinery in Russia’s Tatarstan region and another attack by Yemen’s Houthis on the Jazan refinery in Saudi Arabia. The Jazan refinery has been shut since July 27 due to an earlier strike by the Houthis, and plans to restart it have been postponed from August 15 to August 30, according to industry monitor IIR Energy.
“The refinery attacks have taken substantial amounts of diesel off the market,” Mizuho analyst Bob Yawger said in a note.
Crude oil is the biggest driver for fuel prices, but the gains in diesel futures outpaced U.S. West Texas Intermediate futures and Brent futures, both of which settled up about 5% as hopes of reopening the Strait of Hormuz appeared to fade with the United States and Iran trading demands for compensation.
The blockade of the Strait of Hormuz in the ongoing Iran war has sharply cut global diesel supply by choking the flow of both the fuel and crude oil from the Middle East. Ukraine has also intensified attacks on Russian energy infrastructure in recent months, prompting Moscow to ban exports of both gasoline and diesel until the end of January 2027, further tightening global supply.
U.S. inventories of distillate fuels, which include diesel and heating oil, stood at 107.2 million barrels as of July 31, the lowest for this time of year in three decades.
Analysts expect the U.S. distillates stockpile to have decreased again last week by around 1.6 million barrels, according to a preliminary poll by Reuters.
Reporting by Shariq Khan in New York; Editing by Daniel Wallis
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