Cross barrel implications of an increasingly likely diesel export ban
- Trump publicly backed a diesel export ban last evening, with Treasury Secretary Brent echoing that the administration is “studying feasibility.”
- The talk of this export ban was enough to cause HOGO to tumble.
- Assuming this diesel ban or quota goes ahead on a temporary basis to cover till mid term elections are over, USGC refiners would first maximise yield shift towards jet and mogas production, then store any diesel export length and HO spreads expected to go into contango.
- Runrates would then be next to suffer after product storage option is depleted.
- This would result in medium crudes getting backed out of the refining runs in the USGC whilst the rest of the products get hit as well, thus directionally bullish US product cracks except HO/WTI which would remain compressed. RB/HO thus would be very supported. USGC MRs will see weak demand.
- WTI/Brent would widen further as US crude needs to find more outlets into Europe and Asia. WTI would even go into contango and incentivize crude restocking activity. Brent and Dubai will see a milder response to the timespreads but they are all going to weaken as well. TD25 and TD22 will be key beneficiaries, but this would take a longer time to come into effect vs the product side impact.
- For Europe, ICE GO complex would blow up tremendously. GO E/W will widen further to necessitate diesel flows from Asia into Europe. Brazil will also need to find new import sources for diesel. Australia will need to pay up for diesel imports.
- There is an unlikely scenario for a mogas and crude export ban to be enacted as well. However, the spanner that could emerge is a mogas export ban enacted from Europe in retaliation to the US export ban that would be spell absolute chaos to the markets. We hope it does not reach to that stage of course but this year has thrown us multiple surprises already and political pressures can cause politicians to do things that are more short-sighted in policy.
(Oct HOGO swap pressured)
About the Author
June Goh | Senior Oil Analyst, Sparta Commodities
June is a senior oil market analyst at Sparta specialising in global crude trade flows and refining economics across Asia and Europe. Her analysis is regularly cited by Bloomberg, the Financial Times, and Reuters. With a significant following in the energy community on X (@JuneGoh_Sparta), June’s insights are a staple for institutional traders navigating regional market shifts.
Connect: LinkedIn / X
About Sparta
Sparta is the AI leader for commodity trading, home to Leonidas AI, the first decision-making engine for oil and commodity traders. Backed by USD 42 million in Series B funding led by One Peak, with participation from returning investors FirstMark and Singular, the same investors behind AI leaders like Legora, Dataiku, and Synthesia. From independents to multinationals, the world’s leading commodity teams use Sparta and Leonidas AI to move faster, trade smarter, and stay ahead of the market.
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