Diesel market anxiety is rapidly escalating as crack spreads and ultra-low sulfur diesel prices soar. An early and severe winter blast, combined with significant supply declines from Venezuela, attacks on Russian oil infrastructure, and global diesel inventories falling below average, is driving a dramatic and urgent rally in prices. The surging crack spread is a cry for help from the market as its calling on refiners to get all hands-on deck to alleviate a supply shortage.

The transition over the last couple of weeks the story isn’t about the weakness in crude prices, but the story is about the tightness in global distillate supplies which is driving the diesel crack spread above $57 a barrel for the first time since October of 2022. And unless we see a shift in demand or a change in the winter forecast Alright recovery in Russia’s refining industry and Venezuelans oil production Europe especially might have to worry about staying warm throughout the winter.

Image Source: Unsplash

And it’s not just the diesel crack spread that is showing concerns about supply tightness as the market screens to refiners to focus their attention on building up distillate supplies the gasoline market is also making a case that we still need to produce gas as it cracks spread is making new heights as well.

The oil prices can’t fall too far because if the market is desperate for product supplies, they’re going to need the crude oil, it’s simple as that.

Sanctions against Russia are contributing to the current situation. According to Reuters, Russian oil in Asia is now selling at its largest discount to Brent in a year, as major refiners in India and China have scaled back purchases following new U.S. sanctions targeting top Russian producers, industry sources revealed. The price difference for Urals, Russia’s main crude export, has widened by $2 to reach approximately $4 per barrel under Brent for deliveries in December—marking the most significant discount in about a year, based on information from four trading and refining sources involved with Russian oil supplies.

Weather is also a major factor. The Fox Weather ap is reportingwe are getting our first taste of La Niña winter ahead with big freeze and snow on the way for millions of Americans. During the night, 170 million Americans across 35 states could see temperatures below freezing, the FOX Forecast Center said. he La Niña pattern signifies colder temperatures and also tends to bring more frequent Nor’easters along the Eastern Seaboard, which has already seen several coastal storms this fall.

Cold air from Canada will move south, settling in the Eastern half of the country Sunday and lasting through most of next week. During the night, 170 million Americans across 35 states could see temperatures below freezing, the FOX Forecast Center said. Those across the Dakotas, Nebraska, Iowa and Minnesota may wake up to wind chills in the single digits Sunday morning.

On Monday, cities like Minneapolis, St. Louis, Detroit and Pittsburgh will be waking up to temperatures in the 20s and Atlanta, Dallas, and Nashville will see morning temperatures in the 30s.

That also sent Natural Gas pricesthrough the roof climbing sharply this month, with the Henry Hub benchmark rising from $3.37/MMBtu earlier in the week to $4.39/MMBtu by November 7—a jump of about 30% for the month and over 60% year-to-date.

Natural gas prices are surging as the market faces a perfect storm of tightening supply and spiking demand.

Record-breaking LNG exports are siphoning gas out of the domestic market, with new facilities in Louisiana and Texas helping push U.S. exports to all-time highs. Europe and Asia, hungry for energy after Russian pipeline flows dried up, are driving this export boom, and the EIA expects the trend to continue through 2026, keeping upward pressure on prices.

That demand isn’t just overseas—it’s right here at home.

The La Niña-driven cold snap sending heating and electricity demand through the roof. U.S. consumption is on track to hit 92 Bcf/d this year, up from 90 Bcf/d last year, echoing Europe’s own spike in gas use amid renewable energy shortfalls and a pivot to gas-fired power.

Despite near-record production, storage builds are lagging behind expectations. Last week saw only a 33 Bcf injection, leaving inventories slightly below forecasts and raising concerns about winter drawdowns if demand stays hot. The EIA sees Henry Hub spot prices climbing to $4.10/MMBtu by January as exports and winter usage outpace production growth.

With these fundamentals in play, speculators have piled in, pushing futures up 34% over the past three months. If exports remain strong and winter stays fierce, natural gas prices could keep climbing. But as always, robust U.S. production may step in to keep volatility in check. In short, the market’s message is clear: get ready for a wild ride this winter as supply and demand battle it out.

More By This Author:

Making Canada Great Again - The Energy Report
Cracking Up The Glut - The Energy Report
Chilly Forecast - The Energy Report