When President Donald Trump said last week that the U.S. should stop sending its diesel abroad, the goal was simple: bring down record fuel prices for American farmers and truckers ahead of the midterm elections.
The oil market, however, read his words very differently.
Instead of diesel, the price that started falling was American crude.
On Thursday, Brent crude, the benchmark for oil traded around the world, stood at $100.88 a barrel. West Texas Intermediate (WTI), the benchmark for oil produced in the United States, was at $91.89.
That puts the gap at almost $9 a barrel, about $1.40 wider than a day earlier. In normal times, the difference sits between $2 and $5. On Sept. 28, it reached $12.68, the widest close since March.
Why has the gap between the two major oil benchmarks been widening this much?
What’s Driving the Brent-WTI Spread?
What makes this episode unusual is which side of the gap moved.
In March, the spread also widened, but for another reason. Fears over the Strait of Hormuz pushed both benchmarks higher, and Brent, which reflects seaborne Middle Eastern supply, simply climbed faster.
This time, the move came from the U.S. side. Between Sept. 18 and Sept. 28, Brent gained $1.41 a barrel, while WTI lost $7.70.
A sharp drop on Sept. 29 was mostly technical, as Brent futures rolled to the December contract.
The ETFs show the same split. United States Oil Fund LP (NYSE:USO), which tracks WTI futures, fell 5.3% between the Sept. 18 and Sept. 30 closes. United States Brent Oil Fund LP (NYSE:BNO) slipped only 0.8%.
What Trump Said, And Why It Matters
U.S. highway diesel prices hit a record $6.53 a gallon in late September, up 42.6% since July 10.
On Sept. 22, Trump said: “Let’s not send out the diesel. We make a lot of diesel.”
The White House later denied a report that a 90-day export ban was being prepared.
Yet on Sunday, Trump told Fox News: “We’re thinking about it very seriously.”
How a Diesel Ban Ends Up Hurting U.S. Crude
A refinery buys crude oil and turns it into gasoline, diesel and jet fuel. Many of the big plants on the Gulf Coast were built to sell a large share of that diesel overseas.
If those exports were blocked, the extra diesel would stay in the U.S. market. With fewer buyers for their output, refiners would have less reason to run at full speed.
Running slower means buying less crude, and that weighs on WTI.
“It implies weaker refinery demand for WTI relative to Brent,” StoneX analyst David Scutt said.
Standard Chartered’s Emily Ashford said in a report sent to Rigzone that the market is now pricing “the risk of a not-immaterial cut to U.S. refinery runs.”
On Polymarket, the chance that the U.S. announces a diesel export ban by Oct. 31 stood at 12% on Thursday, down from 22% on Sept. 24.
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