EIA Sees Multiyear Low In Distillate Stocks, Higher Prices

SECAUCUS, NJ (DTN) – U.S. distillate stockpiles are expected to end 2025 and 2026 at multiyear lows due to significant drawdowns, export demand and production issues, the Energy Information Administration said in a forecast Wednesday (9/24).

“Lower distillate inventories elevate the risk of higher prices and price volatility from supply disruptions, especially during periods of high demand like the autumn harvest and winter heating season,” the EIA stated in its September Short-Term Energy Outlook.

According to the EIA, U.S. distillate inventories have increased substantially, but remain relatively low to the seasonal trend of recent years. 

Distillate fuel oil includes both diesel fuel used in vehicles and home heating oil.

The EIA said sharp inventory drawdown in the first half of 2025 was a significant factor for the low inventory forecast.

U.S. total distillate inventories decreased by 17%, or about 22 million bbl, during the period, more than the average decrease of 10%, or 14 million bbl, over the same period of the four previous years.

The large inventory draw was a result of reduced supply of renewable diesel and biodiesel owing to lower production and lower net imports of those fuels. Less renewable diesel and biodiesel supply also resulted in more demand for petroleum-based distillate to fill the gap. 

As renewable diesel and biodiesel consumption decreased by 124,000 bpd, or 35%, in the first half 2025 year-over year, petroleum distillate fuel oil consumption rose 170,000 bpd, or 5%.

The EIA expects the drop in biofuels consumption for first-half 2025 to be a short-term departure from the longer-term trend of biofuels increasing as a share of distillate consumption. It expects renewable diesel and biodiesel consumption to partially recover in second-half 2025 to meet existing and future production mandates under the Renewable Fuel Standard . 

It also expects an increase in renewable diesel and biodiesel production to partially offset the increase in total distillate fuel oil consumption we forecast for 2026. 

That will result in essentially flat distillate fuel oil inventories between December 2025 and December 2026.