The U.S. Gulf Coast distillate market, which was characterized in 2024 by lower price volatility, healthy stocks and high export demand, is beginning 2025 with the same advantages, which should help it to overcome the planned closing of one refinery and the likelihood of higher imports from Nigeria’s 650,000 b/d Dangote refinery.

Refinery runs in the region were strong through most of 2024, ranging from 77.1% to 95.9% of capacity. When Monroe Energy’s 185,000 b/d Trainer, Pa., refinery closed for a major turnaround in September, Gulf Coast refiners were able to produce enough jet fuel to cover any shortfalls in the Northeast. The region, however, will have to deal with the closure of LyondellBasell’s 268,000 b/d Houston refinery in the first quarter.

While the loss of the facility could affect the number of jet fuel and ULSD barrels available for export, market sources said recent expansion projects at refineries in the region should be sufficient to replace the lost capacity. The sources, however, didn’t rule out some price increases in the second and third quarters because of the shutdown.

The US Gulf Coast Remains an Export Hub

The Gulf Coast has increasingly turned to exports in recent years as the refinery-rich region has produced more crude oil and refined products that the U.S. can consume.

According to the Energy Information Administration, monthly exports of jet fuel from the region over the first 10 months of 2024 ranged from 4 million to 6 million bbl and monthly exports of ULSD over the same period ranged from 22.6 million to 40.5 million bbl. In total, the U.S. Gulf Coast exported over 300 million bbl of diesel products and over 45.5 million bbl of jet fuel from January through October.

Mexico remained a major buyer of Gulf Coast refiners, importing nearly 75 million bbl of distillate products over the first 10 months of last year.

As with other U.S. markets, the Gulf Coast is waiting for a clearer picture of President-elect Donald Trump’s tariff policies. In November, Trump promised to impose tariffs on Mexico and Canada, raising concerns that both neighboring countries could retaliate with tariffs of their own.

Potential tariffs and counter-tariffs, however, could harm Mexican consumers, in particular, given the country’s dependence on U.S. refined product imports.

And that is unlikely to change anytime soon given that Mexican state-owned oil company Pemex’s new 340,000 b/d Dos Bocas refinery has experienced problems reaching full capacity.

The possibility of U.S. tariffs could also impact the Midwest (PADD 2) market, which relies heavily on Canadian crude oil and refined products. U.S. imports of distillate reached 46,000 b/d in the final week of 2024, the highest level since mid-August 2018. If tariffs are imposed on Canada, Gulf Coast refiners could find it financially attractive to send more barrels to the nation’s midsection.

U.S. diesel exports (mainly sourced from PADD 3) to Europe rose to a record high in October, according to ship tracking data firm Vortexa.

Europe may well buy more diesel from Gulf Coast refiners in 2025 as Western sanctions of Russian refined products remain in place and Petroineos closes its 150,000 b/d Grangemouth refinery in Scotland by mid-year as Shell halts operations at its 150,000 b/d Wesseling refinery in Germany.

Gulf Coast diesel producers, however, may see more competition from the huge Dangote refinery. The refinery sent its first shipment of jet fuel to the U.S. in 2024 and is working to produce gasoline and ULSD that meets U.S. and EU specifications. Still some market participants don’t believe the refinery will be a major factor in the Gulf Coast and European markets given that it has yet to fully satisfy local demand.

Market sources also said they believe distillate exports from the Gulf Coast will remain strong in 2025, largely on continued healthy Latin American demand.

Lower Price Volatility

When measured against the previous four years, price volatility fell in 2024, due in large part to high product inventories. About $1 separated the high and low prices for jet fuel and ULSD last year, much narrower than in recent years. Diesel prices ranged from $1.99/gal to $2.94/gal last year, while jet fuel prices peaked at $2.89/gal and bottomed out at $1.90/gal.

Prices at the start of the new year are at their highest levels since the third quarter.

Geopolitical tensions have also played a role in Gulf Coast distillate prices. When Iran launched missiles against Israel in the fall, ULSD futures jumped by 10cts in early Oct. 1 trading. Trump in his first term took a hawkish approach toward Iran and may well reimpose a number of sanctions on that country’s economy.