Home > Auto > News > Here's why Chicago is likely the only major US city short on diesel

With the rest of the world swimming in a key industrial fuel, Chicago is running short.

Diesel -- which is used in farms in the Midwest -- is near the highest level in three months in the US city as fuel producers compete with retailers and trading houses for scarce barrels.

That’s bucking the trend almost everywhere else, with a glut of diesel undermining a resurgence in oil prices from their historic drop below zero in April. The fuel is one of the most important petroleum products that refiners churn out, and often powers cars in Europe, is consumed by the freight industry, and is used in construction as well as agriculture.

(Also read: OPEC+ set to discuss short extension of oil production cuts)

The reason Chicago is running short is because refiners in the region had cut operating rates more than in the rest of the country as coronavirus lockdowns crushed demand the past few months. Processors in the Midwest reduced runs to 65% of normal levels in late April, while those in the US Gulf coast were at 73%.

Even as recently as early May, some were curbing production. BP Plc, operator of the largest Midwest refinery at Whiting, Indiana, reduced output to 77% of normal.

(Also read: Oil faces demand uncertainty after record rebound from crash)

However, with the nation emerging from lockdowns, major refiners with plants in the region have been bidding for the fuel since last week to fulfill supply contracts set before Americans headed home to work and cut their travel.

“They long ago entered diesel contracts that they can not fulfill out of their own production," said Steve Mosby, a refined products broker at ADMO Energy LLC. “Instead, they have to go secure this material in the open market."

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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