U.S. oil refining margins reached a record high for the third consecutive day on Thursday, driven by low domestic fuel inventories and geopolitical instability in the Middle East. The 3-2-1 crack spread, a common industry benchmark for profitability, rose more than 2% to close at $69.66 per barrel on the New York Mercantile Exchange.
Domestic fuel stockpiles have declined as international demand for U.S. exports increased following the start of the Iran war in February. According to U.S. Energy Information Administration (EIA) data, gasoline inventories fell to 210.5 million barrels for the week ending July 10, the lowest level for this period since 2012. Diesel stocks stood at 102 million barrels, which is approximately 8 million barrels below the five-year seasonal average.
The supply decline has contributed to higher retail costs, with the national average for gasoline reaching $3.95 per gallon on Thursday. President Donald Trump has called for a Department of Justice investigation into oil companies regarding price-gouging, though analysts attribute the rising costs to refiners prioritizing diesel and jet fuel production over gasoline to meet global demand.
Profit margins for diesel reached a record high of over $91 a barrel on Thursday, while gasoline margins settled at $59 a barrel. Market analysts suggest that retail prices may continue to rise unless profit incentives shift to encourage higher gasoline production relative to other fuels.