Diesel Crisis Continues – What 25 Days of Supply Means for Fleets

By Published On: October 27, 2022Categories: Daily Market News & Insights

If you follow oil markets even tangentially, you’ve likely heard that diesel inventories in the US are now at the lowest level since 2008, with just 25 diesel days of supply left. That’s significant because diesel is the fuel that drives the global economy – powering trucks, construction equipment, generators, heaters, and more. A sudden supply outage or a big surge in demand – such as panic buying, cold weather, holiday sales, or industry-specific factors – can cause a supply/demand imbalance, leading the market to pull more product out of inventory to make up the difference. But what if that product isn’t there?

Diesel markets operate on a “just-in-time” basis – pipeline shipments arrive every few days, bringing enough supply to meet local demand in local markets such as Birmingham or Richmond. But a disruption forces markets to turn to inventory. US diesel markets tend to be comfortable and liquid when inventories are around 35-40 days; 30 days of supply begins to get tight. At 25 days of supply, there’s critically low fuel available when a crisis hits.  Keep in mind, those inventories include products held at refineries and en route on the pipeline – so a large chunk of that supply is days or weeks away from the market where it will be consumed.

The East Coast is receiving especially high focus because it relies on just two pipelines and is supplied by an area (Gulf Coast refiners) that can easily re-route supplies to other countries at the right price. Normally, East Coast markets would have about 50 million barrels of supply in storage throughout the market – and sometimes much more. This year, however, the East has less than 25 million barrels on hand. That means that when bulk traders go to pull their inventories, they may not find much left in the tank. For East Coast fleets, then – now is the critical time to make sure your supplier has a plan for the winter to keep your equipment running. Outside the East Coast, markets could face some challenges, but most of the biggest issues will be concentrated eastward.

This article is part of Daily Market News & Insights

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