Diesel Export Ban Talk Collides With Record US Pump Prices as Brent Holds Above $105
Washington is weighing a ban on diesel exports just as average US pump prices hit a record $6.5107 a gallon, while Brent holds above $105 on renewed Houthi attacks on Saudi export infrastructure and stalled Hormuz flows.
Benchmark crude held elevated through the week even as the two sides of the Atlantic basin diverged. Brent traded at $105.65 a barrel on Friday, up from around $102 on Monday, while WTI ended the week lower at $93.11 after starting near $98. The split reflects a market pricing security risk at Middle East loading terminals rather than a broad physical deficit. Houthi forces said on Thursday they had fired a barrage of missiles and drones at Saudi targets including the Yanbu port on the Red Sea, which has become the kingdom's main oil export terminal while the Strait of Hormuz remains largely shut.
The product side of the barrel is far tighter than crude. Average US diesel prices have jumped to a record $6.5107 a gallon, according to AAA. The United States exported a record 1.6 million barrels per day of diesel in August, up from about 1 million bpd in February before the war began, with Brazil, Chile, Mexico, Peru, Morocco, France and the UK among the top buyers. Russia, the world's second-biggest diesel exporter, banned exports in July until at least the end of September. Supply has been further reduced by Ukrainian strikes on Russian refineries, damage to Middle East refineries and already low inventories.
Analysts warned that a US export ban would likely be self-defeating. Capital Economics said a surplus of diesel in the United States could paradoxically force American refiners to cut crude runs and reduce output of gasoline and other products, potentially within a few weeks. The American Petroleum Institute said restricting exports would destabilise refinery operations and deepen a global refining crisis. Energy economist Philip Verleger estimated a ban could raise world prices by as much as 100% given the fuel's low price elasticity of demand. Europe, a net importer that has grown more reliant on US barrels as Middle East exports declined, would be left with limited alternatives.
Diplomacy remains the main swing factor for the weeks ahead. Washington and Tehran are reported to be discussing a ceasefire under which Iran would reopen the Strait of Hormuz in exchange for the United States lifting its naval blockade. Sparta Commodities senior oil market analyst June Goh said prices are likely to stay above $100 a barrel as things stand, noting that the gap in global oil inventories is getting wider with no clear resolution in sight. KCM Trade chief market analyst Tim Waterer said diplomatic efforts provide some counterweight, but the upside bias remains in place until there is clearer evidence of durable de-escalation.