Diesel Shortage Outlasts the Market
Rick Manelius@rickmanelius
−3.6%
since Oct 14
The idea
I think diesel stays tight and expensive well past what the futures market is pricing in. Refinery outages across Russia and the Middle East take six to eight months to fix, ceasefires keep breaking, China has cut fuel exports, and reserve releases taper off right when demand pressure builds. The portfolio owns that spread through diesel-heavy refiners, both large and smaller, product tankers that benefit as fuel travels farther, and a small renewable diesel position, with cash held back to add if prices dip.
What it owns
- With Russian and Gulf diesel offline, fuel has to be shipped longer distances, which pushes up what these ships earn. · Scorpio TankersIt runs the largest fleet of tankers built to carry fuel, and when usual suppliers like Russia go dark, diesel has to travel farther., TORMIt carries fuel heavily on Europe routes, where losing Russian diesel forces imports from much farther away., HafniaIt has a large fuel tanker fleet that works worldwide, so it gets paid whenever diesel trade gets rerouted over longer distances., International SeawaysIt owns both crude and fuel tankers, so it gains when disrupted refining shuffles both oil and diesel across longer routes., Ardmore ShippingIt is a small fuel tanker company, so higher shipping rates hit its profits harder than the big fleets., Teekay TankersIt runs mostly mid-size tankers that carry crude and some fuel, and it earns more when sanctions push cargoes onto longer routes.30%
- Smaller refiners earn the same widened gap on a smaller base, so their profits and share prices move more when diesel stays tight. · HF SinclairIt is a mid-size refiner in the Rockies and middle of the country, so its profits swing harder than the big ones when diesel prices move., PBF EnergyIt runs East Coast refineries that normally import diesel, so it gains most when foreign supply from Russia and elsewhere goes missing., Delek US HoldingsIt is a small inland refiner in Texas and the South, so it moves hard on diesel profits and gives the take more punch if the shortage outlasts expectations., Par Pacific HoldingsIt refines in Hawaii and the Pacific Northwest, places that rely on shipped-in fuel and feel shortages fast., CVR EnergyIts refineries in Kansas and Oklahoma sell diesel into the farm belt, where trucks and tractors need it no matter the price.29%
- The largest US refiners turn crude into diesel at scale and keep the record gap between crude and diesel prices. · Valero EnergyIt gets a large share of diesel out of every barrel it refines, so it earns more when diesel is short and crude isn't., Marathon PetroleumIt is one of the two biggest US refiners and turns that size into wide profits per barrel when diesel is scarce., Phillips 66It gets paid on diesel too, but its chemicals, pipelines and fuel stations make it the steadier refiner if timing shifts.26%
- Renewable diesel sells at diesel prices, so a lasting shortage lifts what this producer earns too. · Darling IngredientsIt makes renewable diesel through a joint venture, and that fuel sells at prices tied to regular diesel, so a lasting shortage lifts what it earns.5%
- Cash10%