New York Harbor ultra-low sulphur diesel (ULSD) futures, the US heating oil benchmark, fell 2.8 per cent on Monday to US$4.7632 a gallon. President Donald Trump's waiver of sanctions on Russia, signed on Friday, raised hopes of more Russian diesel reaching world markets.

The drop barely dents the year's gains. The contract is up 124.5 per cent since January, while Brent crude is up about 77 per cent year on year.

That gap is the story of 2026. Diesel, heating oil and jet fuel are all middle distillates. That pool has been hit hardest by war in the Gulf and drone strikes in Russia.

One barrel, many uses

The NYMEX contract is still called heating oil, but it settles on ULSD delivered in New York Harbor. The same fuel runs trucks, trains, ships, mines and farm machinery. About 3 per cent of US households heat their homes with it.

Why diesel rose more than crude

The answer lies in the crack spread, the gap between a fuel's price and the crude it is made from. Shipley Energy says the heating-oil crack hit a record near US$117 a barrel in mid-September. In August, freight data firm SONAR put the diesel crack at more than three times its year-earlier level.

Gulf crude grades yield a lot of diesel, and Gulf product exports remain at about half of normal. Ukrainian drone strikes damaged Russian refineries, and Moscow banned most diesel exports from July.

The result was a global shortfall. The International Energy Agency (IEA) estimates diesel and gasoil supply was 1.7 million barrels a day lower year on year in the third quarter. Combined net diesel exports from the Middle East and Russia fell more than 60 per cent in September.

A record September

The squeeze peaked in September, after attacks on Saudi Arabia's crude export system. NYMEX diesel futures hit a record US$5.262 a gallon on 15 September, S&P Global reported.

The US government's weekly retail diesel price reached a record US$6.529 a gallon on 21 September. Wholesale diesel topped US$200 a barrel in Singapore, the IEA says.

Prices have eased since. On 15 October, the IEA backed releasing about 100 million barrels of emergency stocks, including more than 20 million barrels of diesel. Trump also announced a deal for Russia to supply 300,000 tonnes of diesel, with more to follow.

Asia, Europe and jet fuel

The squeeze is global. Asian 10-ppm diesel margins hit a record of just over US$87 a barrel in mid-September, against about US$22 before the war, LSEG data show.

Europe has eased first. The IEA says European diesel cracks fell from about US$100 a barrel to near US$60 by early October.

Jet fuel, drawn from the same pool, has hit airlines. The International Air Transport Association assumes jet fuel will average US$152 a barrel in 2026, almost 70 per cent above 2025.

The northern winter

Winter adds demand just as stocks are thin. US distillate inventories fell to 102.6 million barrels in the week to 9 October, 12 per cent below the five-year average. Saxo Bank's Ole Hansen called it the lowest seasonal level on record.

The EIA expects household heating oil spending to rise 21 per cent this winter. The IEA expects diesel tightness to last well into 2027, with stocks unlikely to be rebuilt before the second half.

The Australian angle

Australia is especially exposed. It imports about 90 per cent of its liquid fuel, and the ABC describes it as the world's largest diesel importer.

Stocks are thin. Australia held 33 days of diesel and 28 days of jet fuel on 13 October, official figures show. Diesel averaged 279 cents a litre in the five largest cities on 14 October.

What could go wrong

Supply relief could prove thin. EU economy chief Valdis Dombrovskis questioned whether Russia can supply the promised volumes. Ukraine says it will keep attacking Russian infrastructure.

Metric

Value

Price (USD/Gal)

4.7632

Daily change

−0.1359 (−2.77%)

Weekly change

+0.85%

Monthly change

−2.58%

Year to date

+124.52%

Year on year

+117.29%

Price date

19 October 2026