Week in Review – Fuel Markets Juggle Russian Supply Uncertainty and Looming U.S. Biofuel Policy Decisions

Crude markets were pulled in multiple directions this week as rising geopolitical risks overlapped with shifting U.S. fuel policy debates and early signs of supply improvement. Prices climbed more than 1% on Friday after a Ukrainian drone strike hit Russia’s Novorossiysk port, which is one of the country’s most important crude export hubs. This event led to a temporary cease in shipments and prompted pipeline operator Transneft to suspend its flows.

Beginning November 21, the U.S. will ban transactions with Rosneft and Lukoil, contributing to mounting logistical delays in Russian crude movements. JP Morgan estimates roughly 1.4 Mbpd of Russian oil, nearly a third of its seaborne exports, is now sitting in floating storage due to offloading challenges, potentially tightening supply if the situation escalates.

Domestically, the latest EIA report shifted attention to refining fundamentals. Refinery utilization jumped to 89.4% as facilities exit fall maintenance, boosting gasoline and diesel output. Gasoline production rose to 9.93 Mbpd, while distillate output increased to just over 5 Mbpd, slightly above year-ago levels. Even so, product inventories continued to decline. Gasoline stocks fell by 900,000 barrels and remain 4% below seasonal norms, with the East Coast seeing a steep 2.3-million-barrel decline. Distillates dropped by 600,000 barrels and now sit 8% below average levels, driven largely by strong exports and firm implied demand.

Diesel Days of Supply remained below 30 days for a sixth straight week. This shows a sign of tightness heading into the winter heating season. The expected return of the Lima refinery later this month should provide additional relief, though it will take multiple weeks of elevated refinery runs to meaningfully rebuild inventories.

Crude inventories, meanwhile, posted another strong build of 6.4 million barrels as U.S. production climbed to a record 13.86 Mbpd. Imports exceeded exports by a wide margin, further contributing to the increase. Despite the build, crude stocks remain roughly 4% below the five-year average.

In Washington, markets are closely watching as the White House hosts separate meetings with refiners and biofuel producers to negotiate a path forward on small refinery exemptions under the Renewable Fuel Standard. The administration is nearing a long-delayed decision on whether larger refiners must make up 2.18 billion waived RIN obligations from 2023 to 2025, an outcome that could influence refining costs, fuel prices, and farm-belt ethanol demand. Discussions also included potential reforms to the waiver process and the expansion of year-round E15 availability. Both industries are pressing their cases ahead of the decision, which carries meaningful political and market implications.

Prices in Review

Crude prices opened the week at $59.87 on Monday and moved modestly higher on Tuesday to $60.07, followed by a stronger uptick on Wednesday when prices reached the weekly high of $61.05. Markets then pulled back sharply on Thursday, with crude dropping to $58.47, before increasing slightly on Friday at $58.71. Overall, crude fell $1.16 per barrel from Monday’s open, a 1.94% decrease week-over-week.

Diesel prices opened at $2.4848 on Monday and saw a modest increase on Tuesday to $2.4956, followed by a stronger mid-week climb to $2.5808 on Wednesday, which was the high point for the week. Prices then retreated on Thursday, falling to $2.4688, and remained relatively steady on Friday at $2.4692. Overall, diesel declined $0.0156 per gallon from Monday’s open, marking a 0.63% decrease week-over-week.

Gasoline prices opened at $1.9440 on Monday and edged higher to $1.9630 on Tuesday, before posting the week’s strongest gain on Wednesday at $2.0132. Prices then pulled back on Thursday to $1.9523, increasing slightly on Friday to $1.9605. Overall, gasoline rose $0.0165 per gallon from Monday’s open, marking a 0.85% increase week-over-week.