ULSD diesel at $3.35/gal has settled into an elevated plateau after the March crisis spike to $4.84, with the forward curve mildly backwardated from Jul ($3.18) through Dec ($2.99). US distillate inventories sit at ~107 million barrels, ~14% below the 5-year average, with weekly draws persisting instead of the typical seasonal build. Domestic demand has risen 7.2% YoY to 3.7 million b/d while net exports surge 27% above Q2 2025 levels. Refining margins remain at historically high levels on record middle distillate cracks, and three California refinery closures have permanently removed domestic capacity. The procurement call: maintain defensive positioning with layered hedges against headline-driven spikes, while monitoring Iran/Strait of Hormuz risk and new hydrocracking capacity (~800K b/d) due online from Middle East and APAC through H2 2026.
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