(Reuters) – U.S. refiner margins registered a fresh record high for the third consecutive session on Thursday, as low stockpiles and worsening tensions in the Middle East threaten potential supply shortfalls in the world’s largest fuel consuming nation. U.S. refiners have been the biggest beneficiaries of the Iran war as international buyers have clamored for their supplies, pushing the country’s fuel exports to record highs. As a result, however, domestic fuel stockpiles have dropped and lifted fuel prices sharply, weighing on consumer budgets in the peak summer driving season and posing potential problems for farmers in the country’s Midwest.
The 3-2-1 crack spread, the most widely used benchmark for U.S. refiner profitability, rose over 2% to close at $69.66 a barrel, a record high. The spread, traded on the New York Mercantile Exchange, is used by refiners as a hedging instrument to lock in their profit margins. Diesel, the biggest portion of global oil consumption, has been the primary driver of U.S. refiner economics in recent months. Inventories of the industrial fuel had been tight for years due to refinery closures in the West, and disruptions to Middle Eastern exports from the Iran war made the market tighter before a temporary ban to Russian exports announced this month exacerbated the global diesel shortage even more.
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U.S. diesel stockpiles rose 4.5 million barrels last week to over 102 million barrels, but were still nearly 11 million barrels below the level recorded on February 27 and about 8 million barrels below the five-year seasonal average, data from the U.S. Energy Information Administration showed on Wednesday.
Gasoline supplies, meanwhile, are becoming a growing cause of concern as U.S. and global refiners have lowered output of the motor fuel in favor of higher diesel and jet fuel yields. The supply-demand imbalance has pulled U.S. gasoline stockpiles down more sharply than diesel since the start of the Iran war at the end of February, slapping U.S. motorists with sticker shocks.
U.S. gasoline inventories fell over 1.5 million barrels to 210.5 million barrels in the week ended July 10, down over 42 million barrels since the week ended February 27 and some 14 million barrels below the five-year seasonal average, EIA data showed.
The motor fuel stockpile is the lowest for this time of year since 2012, the EIA data showed.
U.S. national average retail gasoline prices stood at $3.95 a gallon on Thursday, up nearly 80 cents from the same time last year, data from GasBuddy showed. Prices had surged to as high as $4.56 per gallon in May due to disruptions to Middle East oil exports resulting from the blockade of the Strait of Hormuz, the data showed. Gasoline prices are among the most visible inflationary indicators for U.S. consumers, making the price surge a political anathema for U.S. President Donald Trump, who has accused oil companies of price-gouging, without providing evidence. Analysts say even more pain may be in store for U.S. motorists before refiners turn their attention to gasoline.
“Encouraging refiners to revert to max-gasoline mode will require higher gasoline prices at retail and wholesale levels as well as increased margins relative to other fuels,” London-based independent oil analyst John Kemp wrote to subscribers on Thursday.
U.S. gasoline crack spread settled at about $59 a barrel on Thursday, a level last reached in June 2022. The diesel crack spread settled at over $91 a barrel, a record high.
Reporting by Shariq Khan in New York; Editing Liz Hampton
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