In its latest short term energy outlook (STEO), which was released earlier this month, the U.S. Energy Information Administration (EIA) projected that end of month total distillate stocks “will be eight percent lower on average in 2025 compared with last year and will decline another four percent in 2026”.
These stocks include petroleum-based distillate, renewable diesel, and biodiesel, the EIA highlighted in its March STEO.
“A decrease in U.S. refining capacity and an increase in U.S. distillate fuel consumption contribute to low distillate fuel inventories in our forecast,” the EIA said in the STEO.
“Closures of two U.S. refineries in 2025 are likely to decrease the production of refined products over the next two years,” it added.
“At the same time, we expect U.S. distillate consumption will increase because of increasing industrial activity and growing imports of goods into the United States related to a strengthening U.S. dollar, which support demand for diesel fuel for on-highway trucking,” it continued.
“Declining distillate production and rising consumption make it likely suppliers will draw on distillate stocks and reduce U.S. distillate exports to balance the domestic market,” it went on to state.
In its latest STEO, the EIA noted that, if its forecast is realized, average end of month total distillate stocks in 2026 would be at their lowest since 2000.
“Lower stocks would contribute to tighter market conditions, especially during higher demand periods such as the fall harvest season and winter heating season, which could lead to higher prices for distillate,” the EIA warned in its March STEO.
“We expect refining margins for distillate fuel to rise from 52 cents per gallon last year to almost 60 cents per gallon this year and nearly 80 cents per gallon in 2026,” it said.
“However, declining crude oil prices could mitigate the effect of higher margins on retail prices. We expect retail diesel prices to average about $3.60 per gallon in 2025 and slightly more than $3.70 per gallon next year, both of which are down from 2024,” the EIA added.
In its latest STEO, the EIA projected that the U.S. on-highway diesel fuel price will average $3.62 per gallon this year and $3.74 per gallon next year. The U.S. on-highway diesel fuel price averaged $3.76 per gallon in 2024, the EIA’s March STEO highlighted.
“We forecast U.S. distillate net exports (exports minus imports) to decline in 2025 and 2026, mostly due to lower U.S. distillate exports,” the EIA said in its latest STEO.
“In 2024, the United States exported the most distillate fuel since 2019 because of relatively low distillate consumption in the United States and relatively strong demand overseas,” it added.
“We expect this trend to reverse in 2025 as increasing domestic distillate consumption and declining production pull product away from exports,” the EIA went on to state.
Total distillate fuel oil inventories are projected to come in at 123.88 million barrels in 2025 and 121.38 million barrels in 2026, the EIA’s March STEO outlined. Total distillate fuel oil inventories hit 140.29 million barrels in 2024, the EIA’s latest STEO showed.
In its latest STEO, the EIA forecast that total distillate fuel oil inventories will come in at 119.72 million barrels in the first quarter of 2025, 123.44 million barrels in the second quarter, 121.78 million barrels in the third quarter, 123.88 million barrels in the fourth quarter, 116.35 million barrels in the first quarter of next year, 116.07 million barrels in the second quarter, 115.40 million barrels in the third quarter, and 121.38 million barrels in the fourth quarter of 2026.
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