Heating Oil vs WTI crack spread November 20,2025

Overview

As December WTI expires today, we are taking one last look at its relationship to December ULSD/HO. We were clearly wrong to suggest that the spread had topped out at just over $47 as the spread rose dramatically 2 days ago to a fresh high over $53. Although, the narrative that we had proffered of rising US refinery operations and a slight slowdown in US distillate export volumes  has come to pass, the market focused way more on the supply concerns that sanctions will put on Russian diesel exports.

Reuters reported Tuesday that after Ukrainian attacks on Russian energy and port infrastructure, profit margins on diesel fuel surged in Europe, reaching their highest on Tuesday since September 2023, amid an increase in refinery margins globally. Morgan Stanley now says that between 150 and 200 MBPD of diesel supply--around 2% of global supply--could be curtailed if Turkey and Brazil reduce their imports from Russia. (WSJ) The gains in European Gasoil prices were also said to be a function of  limited import arrivals heading into northwest Europe markets in December, two trade sources say. (Reuters)

This surge for the spread in Europe was felt in Asia as well. Asian gasoil cracks hit a 2-year high of $29 this week as the Russian risks tighten supply, according to Quantum Commodities reporting. In Asia, front month spot activity was seen supported by the firm supply-demand fundamentals, but could ease by first half of December as some refineries gradually resume production after maintenance. Although, Chinese diesel exports are seen remaining lower than in prior months. Chinese diesel exports in December are seen below 400,000 tonnes. In October Chinese diesel exports were running at 740,000 tonnes. Reuters reporting has Chinese diesel exports having averaged 582,000 tonnes in the first 10 months of this year. The amount of diesel China exports is heavily influenced by the export quotas granted by the Chinese government to state-owned refiners; thus, December's lower export level may be a function of the refiners having used up much of the quotas for 2025.

In Wednesday's DOE stats, there was an increase in inputs to refineries of  259 MBPD. This raised crude inputs to refineries to 16.232 MMBPD, which is 4 MBPD more than the amount seen 1 year ago. Most of the refinery run increase was seen in the Midwest region, where a prior issue at the very large BP Whiting, Indiana refinery had curtailed operations. The refinery runs were seen at 15.219 MMBPD at the beginning of the month, which was then the lowest amount seen since late January. US refiners are thus coming out of turnaround, while also taking advantage of the incentive of multi year high margins.

Now going forward, the key, in our opinion, to the cracks staying firm, even going higher, will be based upon how cold the Northern hemisphere will be this winter and by how much the Russian fuel supply is actually decreased. And we repeat the IEA's comment from last week re refining operations globally: " global refinery runs slumped by 2.9 MMBPD month on month to 81.5 MMBPD in October, but are set to increase sharply towards year-end. "

Technically, both the December and January HO/CL cracks settled Tuesday over their respective daily chart's upper bollinger bands, creating a mean reversion set up that was confirmed with yesterday's closes back below those bands. The momentum for the January HO/CL spread is still positive, though a further decline in the spread value will turn the momentum downward.
Upside resistance has been created by the high seen Tuesday at $49.35. A break of that level would suggest a possible rise to $52 based on the December price action seen this week. Support for the January HO/CL spread is possible at the previous highs at the $43.25 area. And as we suggested in prior emails with regard to the December crack spread, a move back below $40 does not look likely, as seen with the prior resistance basis the January crack looming at the $39 area.

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