Diesel Cracks Break $98 as Refinery Outages Tighten Fuel Supply

Yemen’s Houthis claimed responsibility for the attack. Jazan had already been offline since July 27, and Aramco has reportedly pushed its restart to around August 30.

The refinery’s product mix makes the outage particularly important for diesel. At full design capacity, Jazan can produce approximately:

Diesel capacity alone is equivalent to about 62.5% of Jazan’s crude throughput. The outage is therefore removing a refinery heavily geared toward the product that is already in short supply.

Jazan's Diesel Loss Adds Up Quickly

Using Jazan’s designed ULSD capacity as a reference, every week offline represents as much as 1.75 million barrels of potential diesel production.

Over 30 days:

250,000 bpd × 30 = 7.5 million barrels.

Over five weeks:

250,000 bpd × 35 = 8.75 million barrels.

These are theoretical figures rather than confirmed production losses: actual output before the shutdown may have been below nameplate capacity. They nevertheless show the scale of the disruption.

At a $98 crack, 250,000 barrels per day corresponds to $24.5 million per day in theoretical gross crack value. That is not Aramco’s lost profit — it excludes the refinery’s full product slate, operating costs, and other variables, but it shows how expensive replacement diesel has become.

A $98 Crack Is a Refining Problem

The diesel crack measures the value of diesel relative to the crude used to produce it. Above $98 per barrel, the spread is signaling a severe shortage of available refining output rather than a shortage of crude itself.

The distinction is visible in the physical market. A refinery outage removes crude demand because the plant stops processing barrels. But it simultaneously removes gasoline, diesel and jet fuel from the market.

At Jazan, the simplified balance looks like this:

400,000 bpd crude processing offline

versus

up to 250,000 bpd of designed ULSD capacity offline.

The first number can reduce demand for crude. The second tightens diesel supply. That allows crude prices and diesel margins to move in opposite directions.

U.S. Diesel Jumped 7.4% in a Day

The price reaction is not confined to the Middle East. U.S. ultra-low sulfur diesel futures jumped 7.4% to around $4.19 per gallon on August 10, while European diesel refining margins rose by almost 10%, according to Reuters.

At 42 gallons per barrel, $4.19 per gallon is equivalent to roughly:

$176 per barrel of finished diesel.

That figure should not be compared directly with the $98 crack because one represents the product price and the other the margin over crude. Together, however, they show how far the diesel complex has moved. The rally is being amplified by unusually low inventories.

U.S. Distillate Stocks Fall to 107.2 Million Barrels

U.S. distillate inventories recently stood at approximately 107.2 million barrels, near a 30-year seasonal low, according to Reuters. That leaves the market with a smaller buffer against refinery outages. For scale, Jazan's theoretical 30-day diesel production of 7.5 million barrels is equivalent to roughly 7% of current U.S. distillate inventories.

This does not mean those Saudi barrels would normally be shipped to the United States. The comparison simply shows how large Jazan’s diesel capacity is relative to available inventories in one of the world's biggest fuel markets.

With inventories already depleted, replacing lost production increasingly requires cargoes to travel longer distances and buyers to bid against each other for available supply.

Russian Supply Is Tightening the Same Market

The Saudi outage is occurring while Russian diesel availability is also under pressure. Russia has restricted diesel exports amid domestic supply problems, while attacks on Russian refining infrastructure have reduced confidence in future production.

Europe is particularly exposed. Before sanctions reshaped oil trade, Russia was one of Europe's largest diesel suppliers. European buyers subsequently replaced much of that supply with cargoes from the Middle East, India, the United States and other regions.

Disruptions in Saudi refining therefore affect a supply chain Europe increasingly relies upon.

The market is now dealing simultaneously with:

• 400,000 bpd of Jazan refining capacity offline;
• up to 250,000 bpd of designed Jazan ULSD capacity affected;
• Russian diesel export restrictions;
• attacks on Russian refining infrastructure;
• U.S. distillate inventories near multi-decade seasonal lows;
• higher geopolitical risk around Middle Eastern product shipments.

The record crack is the price response to those constraints arriving at the same time.

Jazan Accounts for Nearly 10% of Aramco's Saudi Refining Capacity

Aramco reported approximately 7.9 million bpd of gross global refining capacity in 2024, including about 4.1 million bpd inside Saudi Arabia.

Jazan therefore represents roughly:

5% of Aramco's global refining capacity

and

9.8% of its Saudi refining capacity.

Its importance is greater in diesel because of the refinery's product configuration. Jazan also sits on Saudi Arabia's Red Sea coast and has associated marine infrastructure for exporting petroleum products. Repeated attacks therefore introduce both production and logistical risk into the same supply chain.

$98 Cracks Push Every Available Refinery to Maximize Diesel

Current margins give refiners a powerful incentive to increase middle-distillate output.

At a $98 crack, the theoretical gross crack value is:

These figures are not refinery profits. They exclude crude quality, refinery yields, operating expenses, transportation, hedging and the value of other products.

They do show why refiners have every reason to maximize diesel output. The limitation is physical capacity. Existing plants can alter yields within a range and increase utilization when equipment permits, but a $98 margin cannot instantly create another refinery.

More Crude Doesn't Replace Lost Diesel

Increasing crude production does not directly solve the current problem. If another 1 million bpd of crude reaches the market but refiners lack spare processing capacity, those barrels do not automatically become additional diesel. Jazan demonstrates the mismatch.

Before the outage:

400,000 bpd crude → refinery → up to 250,000 bpd ULSD + gasoline + other products.

During the outage:

400,000 bpd less refinery crude demand → up to 250,000 bpd less ULSD capacity.

Crude availability can therefore improve at exactly the same time that diesel availability deteriorates. For freight operators, farmers, miners and industrial consumers, Brent or WTI alone increasingly understates the cost pressure coming from the fuel market.

August 30 Becomes the Key Date

Jazan's reported restart around August 30 would return as much as 400,000 bpd of refining capacity, including approximately 250,000 bpd of designed ULSD capacity. If the restart proceeds and other refineries remain operational, diesel cracks could lose part of their current geopolitical and scarcity premium.

Another delay would remove another 1.75 million barrels of potential diesel production for every additional week offline. A further major refinery outage would be harder to absorb with U.S. stocks already around 107.2 million barrels and Russian supply constrained.

The move above $98 is therefore less about the availability of oil than the amount of oil the refining system can convert into middle distillates. Crude can remain available while diesel stays scarce.