US ultra-low-sulfur diesel futures HOc1 fell 4% on Wednesday after Politico reported that the White House is preparing a plan to ban diesel exports for 90 days, which the Trump Administration denied.
Average US diesel prices are sitting near record highs at $6.52 a gallon, according to AAA, straining the farming, transportation and other industrial sectors that rely on the fuel. Wars in Iran and Ukraine have sharply cut exports from some of the biggest producers such as Russia, Saudi Arabia and the United Arab Emirates.
A White House official said a report the US is considering a flat, temporary export ban was not correct.
The October futures contract was last trading at $4.7437 a gallon, down 4%, after earlier declining more than 6%.
Administration says any diesel supply plan would be voluntary
Trump said on Tuesday he backed a ban on diesel exports, as Republican candidates in some of the tightest election races in November called for the measure as a way to curb record fuel prices. Diesel's surge has come as US diesel inventories have dropped to less than 97 million barrels, or about 13% less than the seasonal average over the last five years.
However, US Energy Secretary Chris Wright said on Wednesday that a US ban on diesel exports would not work and could push up gasoline and jet fuel prices.
Wright said the administration was working with the refining industry to increase the supply of US diesel in a "simpler, voluntary, cooperative fashion, without using blunt instruments that would reduce refining throughput." He added that any plan would be voluntary.
He did not detail that plan and said no decisions have been made.
A ban on diesel exports would push up prices of diesel globally. European diesel refining margins rose to a record high on Wednesday after Trump's comments.
Meanwhile, it would push down prices in the United States and hurt US refining margins, analysts have warned.
A ban would likely push refineries to cut the amount of crude they process. If US refineries cut runs, that would reduce the supply of gasoline and other products, potentially pushing up prices for those fuels, analysts and traders said.
U.S. Interior Secretary Doug Burgum said earlier this month that bans on oil, gasoline or diesel exports could lead to retaliatory actions from other countries, which could hurt consumers in states like California, which depends partially on energy imports.
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