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Follow the crack because it is raising serious questions about the perception of an oil glut. Winter is making an early appearance driving the diesel crack spread above $43.00 taking out the December 2022 high and has a clear technical shot to keep driving higher. We also saw a limit up move in Orange Juice as Florida may actually see a freeze. This comes as concerns mount about tight diesel and product supplies. Venezuela’s oil exports plunged 26% from September and Ukrainian hits on Russian oil infrastructure take their toll. Both factors raise concern about heating fuels that are well below average in a winter that is starting off colder than any since 2019.

That year, a cold front barreled through the eastern U.S. from November 11–13, shattering over 300 daily temperature records from the Great Lakes to the Southeast. It delivered Arctic air that felt like mid-winter, with widespread freezes extending into the Deep South. In fact, 2019 was the last time the contiguous United States experienced a below-average winter based on average temperatures.

This news isn’t very warm or comforting after the American Petroleum Institute (API) reported another 2.459-million-barrel drop in distillate supply as well as a 5.653-million-barrel plunge is US gasoline supply further driving diesel crack spreads. Not very gluttonous numbers. 

The argument supporting the idea of an oil glut largely relies on floating storage, which, according to Reuters, may actually be a consequence of Western sanctions on Russia and Iran. Gunvor Group’s CEO stated that these sanctions—including those imposed by President Trump and others—have led to record volumes of oil being stored on ships, effectively preventing a global supply glut.

Recently, the European Union, United Kingdom, and United States have introduced several new sanctions against Russia due to the ongoing war in Ukraine, with the latest U.S. restrictions targeting Russia’s leading oil companies, Rosneft and Lukoil, as reported last month by Reuters. Meanwhile, China continues to be the main destination for Venezuelan oil exports.

The API did report a 6.5-million-barrel increase in crude supply but that is little comfort as we came into the week with US Diesel distillates (primarily distillate fuel oil) inventories in the US are currently 8.4% below the seasonal 5-year average, based on the latest data for the week ending around early November 2025. This equates to roughly 112 million barrels in total stocks, down from a typical 5-year average range of about 122-125 million barrels for this time of year. That drawdown in distillate and gasoline supplies comes down to strong export demand—up 7% compared to last year—and steady use at home, especially for transportation and agriculture. Now add it a cold winter and we could get squeezed.

On the global front, diesel and similar fuel stocks are still tight—about 50 million barrels below the 5-year average as of September 2025. That tightness is sticking around into the fourth quarter because Russian exports have dropped by roughly 500,000 barrels a day, partly due to infrastructure problems, while demand in Europe and Asia remains high.

Sure, global product inventories overall have climbed to a four-year high (just over 7.9 billion barrels), but distillate supplies are still squeezed, which is helping keep refining margins strong. We don’t have the latest November numbers yet, but the International Energy Agency says global supply is still growing—roughly 1.6 million barrels per day for 2025—although that only partially fills the gap.

Turning to heating oil in the U.S.—which is just one slice of the distillate pie—stocks are also running a little low, about 5–8% below the usual average as we head into the 2025–2026 winter. For the Northeast, which is the main market for heating oil, inventories are on track to average around 10 to 12 million barrels this season. Call Phil Flynn at 888-264-5665 for more.

Natural gas is also feeling the impact from the cold forecasts with prices skyrocketing hitting the highest level since July. EBW analytics points out that the December natural gas contract has spanned a wide 64.4¢ range within the past week, with both Lower 48 production and LNG exports pressing steeply higher to each set fresh record highs. The December contract has spanned a wide 64.4¢ range within the past week, with both Lower 48 production and LNG exports pressing steeply higher to each set fresh all-time record highs. Volatility may remain elevated near-term.

Natural gas storage is robust in both the US and Canada, with production expected to keep rising as heating season begins. LNG exports have surged due to strong output at Plaquemines, seasonal factors, and improvements at Cameron and Calcasieu Pass, while Exxon reports Golden Pass remains on track for first LNG by year-end.

The long-term outlook is bullish, especially if cold weather hits in December; however, weaker weather could limit gains. Fox Weather is warning that this November, the expected presence of a La Niña will usher in cooler temperatures across America that, in some regions, will bring snow.

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