USGC 10 ppm diffs look like a sell, export ban or not
- Heating oil spreads and HOGO have weakened on the day as the US government has proposed that Germany and France release strategic diesel stocks to suppress global diesel prices, prompting weakness across the complex despite the news of a refined product export ban for Chinese refiners.
- Should the European governments not comply with this request, the US government has raised the prospect of a US diesel export ban (or curtailment) to temporarily suppress US retail pricing.
- Distillate inventories in the US are extremely low prior to winter, nationally but particularly within PADD 1B, where members of Teamsters Local 877 at the Bayway refinery in Linden, NJ, have authorised a strike. Adding additional uncertainty to supply in PADD 1.
- The threat of further supply disruption in the US comes at an inopportune time, not only from a macro perspective for the diesel complex, but also given that the current turnaround at the Saint John refinery in New Brunswick until mid-November adds considerable supply risk to PADD 1, while rising harvest demand in PADD 2 adds further demand support, drawing on regional inventories.
- Fundamentally, this has kept diesel within the Americas as regional FOBs have gained and freight has reacted to the initial flurry of loading activity over the past week, closing all prompt loading windows bar Peru, Chile, Colombia, and Argentina.
- The trouble is that, with the loss of China’s 1,310 kt of exports confirmed for August 2026 per GACC data, regions newly caught short face additional pressure from the Mangalore refinery outage, threatening Indian regional supply and the viability of exports to the wider Asia-Pacific region, with CPP tightness restricting flows.
- For the moment, given the risk to domestic US supply via demand gains in PADD 2, loss of critical spare import capacity into PADD 1 from Saint John, and closed arbitrage opportunities, in a normal market this would point towards a bearish USGC 10ppm diff and bullish colonial line space allocation outlook. The added threat of diesel export restrictions only amplifies this risk further.
(Houston by origin diesel arbs)
About the Author
Nikolas Plonski, our Oil Market Analyst for the Americas at Sparta, brings experience as a trader from Gent Commodity USA trading diesel and jet paper markets. Nikolas then joined Sparta, where he serves as a cross barrel analyst focused on the Americas.
Connect: LinkedIn
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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