Analysis: Export Ban May Widen NYH-USGC Diesel Gap


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

   DAVENPORT, FL (DTN) -- The price gap between New York Harbor and U.S. Gulf 
Coast diesel has widened sharply this month as regional supply conditions 
diverged, highlighting how a potential U.S. diesel export restriction could 
pressure USGC prices while providing less relief to the East Coast.

   NYH ultra-low sulfur diesel was assessed Monday (9/28) at $4.5980 gallon, a 
45cts premium to USGC ULSD at $4.1480, according to DTN market data. The spread 
has averaged 43.44cts so far in September, up from 35.30cts in August, and 
reached a one-year high of 55.59cts on September 18.

   The current spread is also well above the 34.43cts average over the past 
year and more than double the 18.25cts recorded during the comparable trading 
session in the previous year. Much of the widening occurred before discussions 
of possible export restrictions intensified last week, pointing to supply and 
transportation differences already separating the two markets.

   The possibility of restricting U.S. diesel exports gained momentum over the 
weekend after President Donald Trump said Sunday the administration was looking 
"very seriously" at a ban and "may do it." The comments followed conflicting 
signals last week, when the White House denied a report that it was preparing a 
90-day export ban and Energy Secretary Chris Wright said a flat ban would not 
work and could eventually reduce refinery runs and affect gasoline and jet fuel 
supply.

   The Gulf Coast would have the greatest direct exposure to an export 
restriction because PADD 3 is the country's main diesel-producing and export 
region. Fewer overseas shipments would leave more barrels competing for 
domestic buyers and storage, potentially weighing on USGC ULSD prices and 
refining margins.

   Getting that additional supply to NYH presents a different challenge. 
Colonial Pipeline is the main refined-products artery between the Gulf and East 
coasts, carrying gasoline, diesel, heating oil and jet fuel through its roughly 
5,500-mile system from Houston to the New York Harbor area. The system can 
transport about 2.5 million bpd and has historically operated at or near 
capacity, according to the Energy Information Administration.

   NYH is therefore supplied through a combination of Gulf Coast pipeline 
shipments, regional refinery output and waterborne imports. PADD 1 imported an 
average 124,000 bpd of distillate fuel in 2025, accounting for nearly 80% of 
total U.S. distillate imports, EIA data shows.

   Imports have remained part of the regional supply mix this year. PADD 1 
distillate imports averaged 197,000 bpd in January and 265,000 bpd in February 
before falling to 91,000 bpd in June. Canada supplied all 91,000 bpd imported 
into the region during June, according to EIA.

   Those logistics mean a diesel surplus developing on the Gulf Coast would 
still need available pipeline or marine capacity to reach Northeast consumers. 
NYH also remains connected to the Atlantic Basin through waterborne supply, 
leaving the market more exposed than USGC to international diesel prices.

   The regional difference is also evident in implied refining margins. Using 
West Texas Intermediate crude as a common benchmark, the implied USGC ULSD 
crack stood at $79.16 bbl Monday compared with $98.06 bbl for NYH, according to 
DTN market data. The $18.90-bbl difference corresponds with the 45cts gallon 
NYH premium.

   Over the past year, the USGC crack has averaged $47.16 bbl compared with 
$61.62 bbl for NYH. The gap has increased this month, with the NYH crack 
averaging $107.96 bbl through September 28 versus $89.72 bbl for USGC.

   Both cracks reached one-year highs on September 16, with USGC at a record 
$106.90 bbl and NYH at $117.71 bbl. Two days later, the NYH-USGC outright 
spread widened to its one-year high of 55.59cts gallon.

   Domestic and Global Impact

   An export restriction could put additional pressure on that regional 
relationship. With fewer outlets for Gulf Coast production, USGC prices and 
margins could come under pressure first, while the effect in NYH would depend 
on pipeline flows, regional production and the availability and cost of 
imported barrels.

   U.S. diesel exports have helped replace supplies lost this year from the 
Persian Gulf and Russia. Restricting those shipments would remove barrels from 
an already tight international market, potentially supporting the price of 
waterborne diesel available to the Atlantic Basin even as additional supply 
accumulates on the Gulf Coast.

   A prolonged restriction could eventually affect refinery economics as well. 
If weaker USGC diesel margins make incremental production less attractive, Gulf 
Coast refiners could reduce crude runs rather than continue building surplus 
product. Wright cited that possibility last week in arguing against a flat 
export ban.

   The initial effect of an export restriction could therefore be concentrated 
on the Gulf Coast rather than evenly distributed across U.S. markets. USGC has 
the country's largest outlet to the export market, while NYH must balance Gulf 
Coast pipeline supply with regional production and imports, leaving 
transportation capacity and Atlantic Basin prices important in determining how 
much relief ultimately reaches the Northeast.

   
 




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