U.S. heating oil futures climbed to about $4.94 a gallon while Brent crude fell, two days before the International Energy Agency's board meets to weigh more emergency diesel releases. A gallon of diesel now costs the equivalent of about $207 a barrel.
Crude oil and the fuel that moves trucks, ships and farm machinery went in opposite directions on Tuesday. The gap between them points to where the energy squeeze sits.
New York Harbor ultra-low-sulfur diesel futures, the U.S. benchmark for heating oil and diesel, rose 4.54% to $4.9377 a gallon in early afternoon trading. Over the same stretch Brent crude slipped 0.83% to $105.76 a barrel. U.S. crude edged up 0.43% to $94.14, and natural gas futures gained about 3.8%.
The Energy Select Sector SPDR Fund rose 1.39% and touched its 52-week high during the session.
The policy response so far
The move came on the first full U.S. trading days after the Treasury Department issued General License 135, which authorizes transactions in Russian-origin diesel through April 7, 2027. It does not lift the designations of Rosneft and Lukoil. Energy experts have said the extra Russian supply is unlikely to lower U.S. prices quickly.
Consumer governments are also leaning on stockpiles. IEA members have released about 325 million barrels of oil under the collective action agreed in March, and completing outstanding pledges would add roughly 100 million barrels more. Members still hold about 1.1 billion barrels of public emergency stocks, including more than 200 million barrels of diesel.
IEA Executive Director Fatih Birol has written to member governments ahead of the agency's Governing Board meeting on Thursday. According to the IEA's statement on the letter, he asked those that have not finished their March releases to speed them up, "prioritising diesel," and asked all members to assess "whether additional diesel releases are necessary." The letter cited renewed attacks on energy and civilian infrastructure in Saudi Arabia, including the airport in Riyadh.
The price of a refined barrel
Converting the futures price to barrels shows how far diesel has moved away from crude. At $4.9377 a gallon and 42 gallons to the barrel, diesel futures were worth about $207 a barrel, roughly $102 more than Brent. That spread is the margin refiners earn for turning crude into fuel, and it is where Tuesday's pressure showed up.
A crack-spread index compiled by Trading Economics stood at 66.0 on Monday, below its September record of 78.81. Tuesday's move pushed the cost of the refined product higher again while the raw material eased.
Who pays
Diesel costs flow into freight rates, airline fuel bills, farm inputs and chemical feedstocks before they reach consumer prices. September consumer-price data are due Wednesday morning, and the FactSet consensus, 0.5% for the headline index against 0.2% for core prices, implies energy will account for much of the increase. Higher fuel costs also feed producer prices, which arrive Thursday.
Refiners sit on the other side of the trade. A wider spread between crude and diesel generally supports their margins. Energy shares rose on a day when crude fell.
Market implications
One reading is that relief is slow but real. The Russian license runs into next April, the IEA holds more than 200 million barrels of diesel it can release, and Thursday's board meeting could add volume. On that view Tuesday's jump is noise in a market that is already below its September peak.
A second reading is that the shortage is in refining and logistics rather than crude supply. Licenses and crude releases do not quickly reach diesel tanks, the IEA itself is asking members to prioritize the product, and no Russian cargoes under the new license have been documented.
What to watch
Tuesday's settlement in diesel futures will show whether the gain holds. Weekly U.S. distillate inventory figures, Wednesday's consumer-price report and any decision on extra releases at Thursday's IEA board meeting are the next tests.