U.S. Petroleum products

U.S. distillate inventories
We forecast inventories of distillate fuel oil—often sold as diesel—in the United States to fall below 100 million barrels in September and remain below the five-year (2021–2025) low through the end of 2026 and most of 2027. Distillate inventories fell below the five-year range in April, coinciding with high U.S. net exports of the fuel following the loss of large amounts of distillate supply from the Middle East, Russia, and China. The low inventories are reflected in global distillate prices, which have increased throughout the summer in response to lower international refinery production of distillate fuel oil.

Tightness in the global distillate market raises global prices for distillate and incentivizes U.S. exports of distillate. In the STEO, we assume that global production of distillate fuel will remain below last year’s levels in the coming months, which contributes to our forecast of higher net exports of distillate.

Net exports of distillate have been above or near the five-year high in every month of 2026 since February. Low distillate inventories contribute to higher domestic diesel prices. We expect this effect will be particularly pronounced because of seasonal drops in distillate production and seasonal increases in distillate consumption during the fall and winter. Distillate production typically decreases during the fall refinery maintenance season while harvest-season agricultural demand for distillate increases. Low inventories may also contribute to higher prices for residential heating oil in the Northeastern United States.

U.S. diesel crack spreads
We estimate U.S. average diesel crack spreads to exceed $2 per gallon from August through November, before decreasing steadily through mid-2027. This decrease assumes a return to normal tanker traffic through the Strait of Hormuz in the near term, allowing refineries in Saudia Arabia and Kuwait to increase exports of distillate to the global market. We also expect the return of free-flowing crude oil through from the Middle East will improve the availability of crude oil supplies to East Asian refiners, who may increase production, thereby further contributing to lower international crack spreads. If the flows out of the Middle East remain constrained beyond the end of 2026, we would expect to see higher distillate crack spreads globally than what is included in our current forecast. Global distillate prices face additional upward pressure from the loss of refinery activity in Russia. We estimate that those refinery outages will continue to affect the global market through the first half of 2027.