US diesel export ban to push gasoline prices higher: Morgan Stanley

Morgan Stanley said a US ban on diesel exports could push domestic gasoline prices higher, as full storage tanks could force refineries to reduce operating rates and lower gasoline production.

Analysts, including Martijn Rats, said in a note, cited by Bloomberg, that the ban could force US refineries to cut refining operations by around 2 million barrels per day.

According to the investment bank, even if refineries adjust their production to maximize gasoline output, gasoline supplies would still decline by around 650,000 barrels per day. Meanwhile, domestic US diesel prices would fall, while overseas prices would rise, with Europe bearing the brunt of the impact.

The average retail price of US diesel surged to a record $6.52 per gallon this week, compared with $3.76 in late February, before the US-Israeli attack on Iran.

What does this mean? A ban on diesel exports could have the opposite effect in the US fuel market, as a domestic diesel surplus could prompt refineries to reduce operating rates, curbing gasoline production and driving up gasoline prices.