Trucking Demand Throws a Lifeline to Ailing Refineries

Trucking Demand Throws a Lifeline to Ailing Refineries

imageStock Markets11 hours ago (Mar 31, 2020 02:54PM ET)

(C) Reuters. Trucking Demand Throws a Lifeline to Ailing Refineries

(Bloomberg) — With jets grounded and cars parked, diesel fuel for trucking is giving some relief to refiners as the coronavirus spread cuts deep into demand.

The diesel revenue is sorely needed for the refining industry which has seen plants shut from South Africa to Canada and widepsread production cutbacks due to the pandemic-driven collapse in demand.

In Houston, diesel spot prices are trading at more than 40 cents per gallon higher than 87-unleaded gasoline after selling for a discount earlier in the month. This translates to much better returns on diesel production versus gasoline. The spread between Nymex diesel and West Texas Intermediate crude is holding over $22 a barrel compared with under $5 for gasoline and WTI.

Profits from diesel are the one thing keeping some refineries running, Energy Aspects oil analyst Robert Campbell said. “There has to be some sort of margin to keep up supply and that cannot come from any product but diesel right now,” he said.

Online retail and medical deliveries have kept demand for trucking strong, said Tom Mallon, vice president for freight futures at FreightWaves. Futures interest in trucking rates off the West Coast has been strong since last week as shippers try to lock in rates before what they expect will be a spike, he said.

“It’s the best house in a bad neighborhood,” Campbell said.

(C)2020 Bloomberg L.P.

Trucking Demand Throws a Lifeline to Ailing Refineries

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