The diesel crack — also called the gasoil crack outside North America — measures the margin a refiner earns producing diesel from crude oil. It is the single most important refined-product spread in the contemporary oil market, more consequential than the gasoline crack on most days, because diesel and its close cousins (jet fuel, gasoil, marine fuel) drive far more of global commercial activity than gasoline. Trucking, shipping, aviation, industrial fuel, off-road equipment, agriculture, and heating in many regions all depend on middle-distillate fuels.
The post-2020 oil market has been characterized by a structural diesel shortage that has kept distillate cracks at historically elevated levels for extended periods. Understanding the diesel crack is essential to understanding why refining margins have remained strong, why refiners have prioritized maximum throughput, and why crude prices have decoupled at times from broader macroeconomic signals.
The Two Main Diesel Contracts
Two futures contracts dominate global distillate price discovery:
NYMEX Ultra Low Sulfur Diesel (ULSD). Listed on the New York Mercantile Exchange and delivered into pipelines at the New York harbor area. Each contract is for 42,000 gallons (1,000 barrels) of ULSD meeting U.S. on-road specification (15 parts per million sulfur maximum). The contract was renamed from "heating oil" to ULSD in 2013 to reflect the shift in U.S. on-road diesel specifications, though it is still informally referred to as "HO" or "heating oil" in market chat.
ICE Gasoil. Listed on Intercontinental Exchange and delivered in barge lots into the Amsterdam-Rotterdam-Antwerp (ARA) hub. Each contract is for 100 metric tons of ICE Low Sulfur Gasoil (10 parts per million sulfur). ICE Gasoil is the principal European distillate benchmark and is widely used by global refiners, trading houses, and large industrial fuel consumers for hedging.
The two contracts track each other closely on a freight-adjusted basis, with the price differential representing the cost of moving distillate between the U.S. East Coast and Northwest Europe. When the differential widens substantially, arbitrage flows between the regions tighten the spread back toward freight equilibrium.
The Diesel Crack Calculation
The U.S. diesel crack is conventionally calculated as:
ULSD Crack = (NYMEX ULSD × 42) − WTI Crude
where the ULSD price is multiplied by 42 to convert gallons to barrels. The result is the gross dollar margin per barrel of crude allocated to diesel production.
In Europe, the gasoil crack is typically calculated against ICE Brent:
Gasoil Crack = (ICE Gasoil ÷ 7.45) − ICE Brent
The 7.45 conversion factor reflects the approximate number of barrels per metric ton of gasoil. The result, again, is gross margin per barrel of crude allocated to gasoil production.
Both spreads typically trade in the range of $20 to $40 per barrel under normal conditions, with stress episodes — including most of 2022 and parts of 2023 — pushing the spread to $60 per barrel or more. The 2022 European gasoil crack briefly exceeded $80 per barrel, the highest level on record.
Why Diesel Cracks Have Structurally Strengthened
Several long-term forces have shifted the global diesel market into structural deficit:
The European diesel fleet legacy. European policy through the 1990s and 2000s explicitly favored diesel passenger vehicles over gasoline, on the grounds of better fuel efficiency and lower CO2 emissions per kilometer. The result was a vehicle fleet skewed heavily toward diesel — and refining capacity that could not produce enough diesel to meet that demand, requiring chronic European net imports.
The 2022 loss of Russian diesel. The European Union's February 2023 ban on imports of Russian refined products removed approximately 600,000 barrels per day of Russian diesel from the European market overnight. The replacement supply came principally from India (where Russian crude is refined and the products re-exported), the U.S. Gulf Coast, and Middle Eastern refineries — at meaningfully higher freight cost and after structural reshaping of trade flows.
Aviation recovery and SAF requirements. Post-COVID jet fuel demand has returned to and exceeded pre-pandemic levels, and jet fuel is a close substitute for diesel at the molecule level. Strong jet demand pulls refineries to maximize kerosene production, which competes with diesel output. Sustainable aviation fuel mandates have added additional pressure on the jet supply chain.
Refinery closures. U.S. and European refining capacity has contracted since 2019, with multiple permanent closures (Philadelphia Energy Solutions, Hess St. Croix's earlier closure, several European facilities) reducing distillate-producing capacity that has not been fully replaced.
IMO 2020. The International Maritime Organization's 0.5% sulfur cap on marine fuel, effective January 2020, shifted marine fuel demand from high-sulfur fuel oil toward low-sulfur fuels — including marine gasoil, which competes directly with on-road diesel for the same molecules.
The Jet-Diesel Switch
One of the most operationally important features of the distillate complex is that refineries can shift production between jet fuel and diesel on relatively short notice. The two products are produced from the same crude fraction (the kerosene/distillate cut) with different fractionation and treating steps.
When jet cracks are strong relative to diesel cracks, refiners maximize jet production. When diesel cracks lead, refiners pull yield back toward diesel. This switch happens within days to weeks at most refineries and is one of the principal mechanisms by which the global distillate market clears.
Watching the jet-diesel differential (Singapore jet kerosene vs Singapore gasoil, or NYMEX jet vs NYMEX ULSD) reveals which fuel is in tighter supply at any given moment and signals refiner allocation behavior.
Seasonal Patterns
Distillate cracks exhibit pronounced seasonality:
Winter heating peak. November through February see distillate cracks at their seasonal peak. U.S. Northeast heating oil demand, European heating gasoil demand, and Chinese winter industrial activity all combine to pull distillate prices higher. Cold-weather events can drive short-term spikes of $10 to $20 per barrel above the seasonal trend.
Spring refining maintenance. Northern Hemisphere refining turnaround season — February through May — temporarily reduces distillate supply. Cracks often hold strong through this period before easing in the early summer.
Summer industrial demand. Asian and U.S. industrial activity through June and July supports distillate demand. The U.S. agriculture cycle (planting, harvest) creates two seasonal diesel demand peaks: spring planting in April-May and fall harvest in September-October.
Fall pre-heating-season buildup. Refiners often build distillate inventory through September and October ahead of winter, which can briefly weaken cracks if inventory builds outpace demand recovery.
Who Trades the Diesel Crack
- Refining companies hedge production through structured crack positions and short ULSD/gasoil futures against long WTI/Brent.
- Trucking and logistics companies hedge forward diesel costs through outright ULSD or gasoil purchases or through fuel surcharge mechanisms tied to ULSD prices.
- Airlines hedge jet fuel through ULSD or gasoil futures with adjustments, given the absence of a deeply liquid jet fuel futures contract.
- Shipping companies hedge bunker fuel costs through marine gasoil or low-sulfur fuel oil derivatives, with cross-hedges into gasoil for the cleanest market.
- Trading houses arbitrage gasoil-ULSD differentials across the Atlantic and across forward time spreads.
- Speculators express views on refining capacity, industrial activity, and the broader diesel structural story through outright or spread positions.
What Drives the Diesel Crack
Industrial activity. Manufacturing PMIs, freight volumes, and construction activity drive diesel demand and tend to move cracks weeks before they show up in crude prices.
Refining outages. Unplanned downtime at major U.S. Gulf Coast, European, or Asian refineries tightens distillate supply rapidly.
Russian product flows. Volumes of Russian diesel reaching the global market — through India, Turkey, and other intermediary routes — directly affect global balance.
Jet fuel demand. Strong aviation activity pulls distillate yield toward jet and tightens diesel supply.
Weather. Cold-weather events in the U.S. Northeast, Europe, or North Asia create acute heating distillate demand.
Chinese export policy. China's diesel and gasoline export quotas, set quarterly by the central government, affect global distillate balance. Generous quotas weaken cracks; tight quotas tighten them.
The Diesel Crack in One Sentence
The diesel crack is the gross dollar margin a refiner earns producing diesel from crude — the single most important refined-product spread in the global oil complex, driven by industrial activity, post-2022 structural shortage, and the operational competition between diesel and jet fuel for the same refining yield.
Continue Reading
- The 3-2-1 crack spread — the broader refining margin proxy
- What is ULSD / heating oil
- Jet fuel and Singapore kerosene
- What is RBOB gasoline
- Oil market glossary