The U.S. Energy Information Administration (EIA) has projected a decrease in total distillate stocks by the end of each month in 2025 and 2026. In its latest Short-Term Energy Outlook (STEO), released earlier this month, the EIA forecasts an average 8% drop in distillate stocks for 2025, followed by another 4% decline in 2026.
Distillate stocks include petroleum-based distillates, renewable diesel, and biodiesel. The EIA attributed the forecasted drop to a combination of factors, including a reduction in U.S. refining capacity and a rise in domestic distillate fuel consumption.
The EIA also pointed out that the closure of two U.S. refineries in 2025 will reduce the production of refined products over the next two years. Meanwhile, increased industrial activity and a stronger U.S. dollar are expected to boost demand for diesel fuel, particularly for on-highway trucking.
As production decreases and consumption rises, the EIA predicts that U.S. suppliers will rely on distillate stocks and reduce exports to meet domestic needs. The agency warned that lower stocks could create tighter market conditions, especially during periods of high demand, such as the fall harvest and winter heating seasons. This may lead to higher distillate prices.
The EIA also forecasts refining margins for distillate fuel will rise, from 52 cents per gallon in 2024 to nearly 80 cents per gallon by 2026. However, lower crude oil prices could offset the impact of higher margins, keeping retail diesel prices around $3.60 per gallon in 2025 and slightly above $3.70 per gallon in 2026, both lower than in 2024.
Regarding U.S. on-highway diesel fuel prices, the EIA projects an average price of $3.62 per gallon in 2025 and $3.74 per gallon in 2026. This is a slight decrease from the $3.76 per gallon average in 2024.
The EIA also predicts a decline in U.S. distillate net exports (exports minus imports) in 2025 and 2026. After strong exports in 2024, driven by low domestic consumption and high demand abroad, the EIA expects a reversal of this trend as domestic consumption increases and production falls.
Total distillate fuel oil inventories are expected to be 123.88 million barrels in 2025 and 121.38 million barrels in 2026, down from 140.29 million barrels in 2024. The EIA also outlined quarterly projections for these inventories through 2026, with the first quarter of 2025 expected to hold 119.72 million barrels and the fourth quarter of 2026 reaching 121.38 million barrels.
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