The US northeast diesel and heating oil market enters 2026 with lingering supply vulnerabilities despite recent improvements in flows. While imports of conventional fuels have resumed, structural constraints and global dynamics suggest that volatility will remain a defining feature in the coming years.
Inventories of ultra-low sulphur diesel (ULSD) and ultra-low sulphur heating oil (ULSH) at the southern US Atlantic coast fell to the lowest level in more than 11-years this summer at 7.67mn bl. That pulled barrels sourced out of the US Gulf coast via the Colonial pipeline away from the line's final destination in the US northeast.
New York Harbor's dependence on imports will persist due to limited refining capacity. While Canadian and Mexican flows improved late in 2025, upcoming refinery maintenance in Canada and operational uncertainties at Mexico's Olmeca refinery could disrupt supply in early 2026. Canadian refiner Suncor began 15 weeks of maintenance on 11 December at its 137,000 b/d Montreal refinery in Quebec, according to an announcement filed with Association industrielle de l'Est de Montreal, a near-term risk for US northeast markets.
US imports from Canada nearly halved on the month in October, according to Vortexa ship-tracking data, partially caused by a turnaround at Irving Oil's 320,000 b/d St John refinery that ended in November.
Following the turnaround, US Atlantic coast imports of ULSD and ULSH were 134,000 b/d, nearly double the level from a year earlier. Multiple cargoes came from Irving's St John refinery, according to Kpler ship-tracking data. But upcoming refinery work may once again come into play.
Mexico's state-owned Pemex's 340,000 b/d Olmeca refinery recently resumed exports to the US after a near six-month period of zero loadings. Olmeca was initially highlighted as a crucial element in the Mexican government's strategy for road fuel self-sufficiency. But Pemex has also explored profitable ULSD export opportunities as local infrastructure has had difficulties absorbing the road fuel output from the Olmeca facility.
Medium-range tanker BW Wren loaded around 300,000 bl of ULSD at the Dos Bocas port on 22 November and discharged throughout the southern US Atlantic coast, according to Kpler data.
European diesel demand, amplified by sanctions on Russian products, kept open the US arbitrage to the Amsterdam-Rotterdam-Antwerp (ARA) hub for much of 2025. If this trend continues, Gulf coast exports to Europe could again constrain diesel flows to the Atlantic coast.
In the longer term, Nigeria's planned Dangote refinery expansion — scheduled for 2028 — may ease European demand for US barrels, but competition for supply will remain intense until then.
Even though the US Atlantic coast remains heavily reliant on domestic and imported cargoes, the fungibility of diesel and heating oil grades provides leeway for sourcing these barrels.
In mid-December, stockpiles of ULSD and ULSH at the central US Atlantic coast were down by 27pc on the year at 12.8mn bl, US Energy Information Administration data shows. Cash differentials that trade against the underlying Nymex basis — often a benchmark for regional demand — fell to 14-month and two-year lows during this period. Weaker demand for conventional diesel and heating oil in the New York region is partly driven by the growing availability and market share of B99 biodiesel. Three states across the northeast, including New York, are actively promoting biofuels adoption through legislative measures, tax incentives and infrastructure investments aimed at reducing emissions in heating systems and commercial transportation. The state of New York this year doubled its heating oil blend mandate to 10pc biodiesel (B10), while Connecticut and Rhode Island have similar B10 and B20 mandates, respectively.
While biofuels help offset reduced inventories of conventional fuels, New York Harbor B99 biodiesel differentials to heating oil have traded at a premium for the first quarter 2026 because of feedstock and supply constraints, weaker credit incentives and policy uncertainty.
Federal biofuel blending mandates for 2026 and 2027 remain unsettled, leading some producers to idle operations heading into the new year as they await clearer direction. In the short term, softer demand and renewed import flows suggest improved supply security for the US Atlantic coast. However, evolving federal policies and shifting global dynamics ensure that volatility will remain a hallmark of the region's diesel market.
