The December Crack Back. The Energy Report 11/18/2025

Winter is coming and the diesel crack spread is signaling real concerns about heavy oil and heating fuels. The December CME diesel crack spread is surging, driven by U.S. Treasury sanctions on Russian oil that are tightening global supplies. Do you want to learn more about crack spreads? Call Phil Flynn 888-264-5665. Recent Trump Administration measures against Rosneft and Lukoil have reduced Moscow’s oil revenue, and Russian export volumes appear set to fall further. Overnight the NY Harbor ULSD crack has reached $49.12/bbl, its highest since late 2023, as December 2025 ULSD futures trade at $2.547/gallon ($106.97/bbl) versus WTI at $59.50/bbl. In late October 2025, the diesel crack spread hovered below $23 per barrel. The current level represents an increase of more than $26 per barrel (+113%) .

The surge could be a  significant turning point not only from an economic standpoint but also geopolitically as it will put more pressure on the Russian economy. Indian refiners have slashed Russian crude imports by a massive 20%—not by choice, but due to mounting payment challenges, the ever-present threat of sanctions and escalating geopolitical turmoil. This has forced India to seek alternative supplies from the Middle East, even though costs are much higher. Reuters reported that, “President Donald Trump is willing to sign legislation to impose sanctions on Russia as long as he retains ultimate decision-making authority over any such measures, a senior White House official said on Monday. Trump told reporters late on Sunday that it was “OK with me” that Republicans were working on legislation to impose sanctions on countries doing business with Russia over Moscow’s failure to negotiate a peace deal with Ukraine.

At the same time, Russian diesel exports are plunging, dropping 15–20% compared to last year. The result? An even tighter supply picture just as winter demand for heating fuel is set to soar. U.S. refineries are already stretched, running at 88% utilization, leaving little spare capacity if things get worse. Diesel prices have surged far above gasoline, defying historical market patterns and the spread has more than doubled since October 2025.

Meanwhile, take a look at what the Financial Times reporting that there’s a record-breaking gulf shaping up between the top three oil demand forecasters for 2026—the IEA, OPEC, and EIA. We’re talking about a 1.8 million barrel per day gap, the widest since 2002! That’s roughly the size of France’s entire oil appetite, and it’s throwing a big question mark over where global demand is headed as the world tries to pivot toward cleaner energy.

On the supply side, traders are wrestling with a two-headed monster: U.S. sanctions squeezing Russian oil companies, and at the same time, a looming threat of surplus as U.S. shale ramps up and economic growth stutters. Brent crude’s been on a roller coaster, whipped around by Middle East headlines all year long. Who’s got the right read on demand? The IEA is bearish for 2026, calling for 104.7 million barrels per day. OPEC’s way more bullish at 106.5 million, and the EIA splits the difference at 105.2 million barrels per day—all according to the Financial Times.

Supply side of this so-called oil glut is going to depend on U.S. oil production rising yet there are signs saying US shale production may be topping out. Doug Lopachin warns that the Texas as Monthly Production numbers released this week clearly illustrates that Monthly Oil & Condensate are truly going in a downward trajectory. US shale oil production is declining, according to that report with August’s Texas output at 153 million barrels—down 24 million barrels from last year. Analyst Doug LoPachin predicted this trend, noting drops in both oil and condensate volumes. Factors include Brent crude’s steady $70 price, fewer rigs, and rising costs for major Permian operators like Exxon and Chevron. Condensate output fell to 24 million barrels, and monthly figures have steadily decreased since spring.

Without intervention, production could soon dip below 150 million barrels. WTI trades near $68, and the market faces potential volatility; investors are advised to monitor inventory reports closely.

The other thing this market is going to watch is weather. The market is stealing from a significant warm up in temperatures from the first deep freeze and the focus for both diesel and natural gas, which took a hit from the warmup, will be how cold it’s going to get.

Fox Weather reported that, “Record-breaking, unseasonable heat is expanding east over the southeastern U.S. beginning on Tuesday, after sending temperatures across Texas soaring into the mid-80s to start the week. This comes as part of a weather whiplash across parts of the Midwest, southern Plains and Southeast which experienced freezing temperatures last week before immediately climbing into conditions more reminiscent of late spring. Yet then Fox Weather says that, “Active end to November could lead to potential Polar Vortex infused cold and snow to start December. Fox Weather says that the weather this November has been nothing short of interesting. Record colds in the East, lake-effect snow around the Great Lakes, unsettled weather across the West, and a geomagnetic storm that brought the Northern Lights to the US have all made headlines in the first half of the month.

Then we inch closer to winter. In the event the Polar Vortex weakens, it won’t be until the last week of November, which could bring cold, snowy conditions to the US just in time for Thanksgiving.  Across the Central and Eastern US, wetter-than-average conditions are expected while much of the East will see above-average temperatures. The opposite is expected in the West, as California and the Northwest will likely face below-average temperatures through the end of the month. The FOX Forecast Center expects the rest of the month to be stormy in the East, with lots of rain and little snow.

If you don’t want to miss a beat, I recommend downloading the Fox Weather app for up-to-date, energy-moving forecasts and tuning in to Fox Business Network for all the action. For my Phil Flynn Daily Trade Levels, feel free to call me at 888-264-5665 or shoot me an email at pflynn@pricegroup.com to stay in the loop.