Late on Friday, Oct. 9, the president announced a deal with Moscow. The U.S. would buy Russian diesel, up to 4.8 million tons of it. That's nearly 36 million barrels. The aim is lower prices at the pump, three weeks before the Nov. 3 election. The Journal's editorial board ran the math, and so did we. In 2025 the world went through 28 million barrels a day of diesel and similar fuels, by OPIS's count. The whole deal is a little more than one day's supply.
Here's how the deal works, as the president described it on Truth Social. The first 300,000 tons come right away. Another 500,000 tons arrive in November. Then one million more. A final three million tons depend on the shape of Russia's refineries, which Ukraine has been hitting for months. To make the shipments legal, the Treasury eased some sanctions on Russia through April 7.
The pushback came fast. Seven senators, four Republicans and three Democrats, said the plan breaks a 2022 law. That law bans Russian energy imports. They said nobody consulted Congress. A Berlin analyst, Janis Kluge, told the Journal that Russia planned to resume diesel exports anyway. In his words, “There was no concession from Putin in this deal.” The Centre for Research on Energy and Clean Air figures Russian oil companies would earn about $4.5 billion from it. By Monday, Russian strikes had hit Ukrainian power sites hours after the president declared an energy ceasefire.
What the refiners did
You'd think more diesel on the market would hurt the companies that make diesel. It didn't. On Monday, Oct. 12, Valero (VLO) rose $2.25 to $436.00 and Marathon Petroleum (MPC) rose $3.78 to $458.81. The Journal's Stock Spotlight said investors were weighing the effect of U.S. moves to boost diesel supplies. On Tuesday Valero jumped another $20.46 to $456.46, a 52-week high, up about 4.7%. Diesel futures rose about 21 cents a gallon the same day, to $4.93. The paper prints no reason for Tuesday's move, so we won't invent one. Kpler's numbers help explain the calm. Russia supplied 11% of the world's diesel exports last year. The Middle East, where the real disruption is, supplied 19%.
Our read
This is the Valero article of the week, so let's be exact. Last weekend the desk raised Valero to 3.0% from 1.5% in ten of its 12 books. We paid for it inside the energy sleeve, so no new money went into stocks. Valero's written trim trigger is a published White House restriction on U.S. diesel exports. That would trap fuel at home and squeeze a refiner's margins. This deal is the opposite kind of step. It adds supply from outside. Nothing this week met the trigger, so Valero stays where it is. Chevron (CVX) and Exxon (XOM) stay at weight too, in 37 and 34 books. Nothing added. This is Investments/Risk, IN04, and the lesson is about rules. We wrote the sell rule down before the headlines came. That's why a loud week didn't turn into a trade.
Here's the piece of this that's yours. Most 401(k) menus have one energy fund, and most people couldn't say what's in it. This week, pull up its top ten holdings. Drillers like Exxon tend to do well when crude rises. Refiners like Valero tend to do well when the gap between crude and diesel widens. Both are labeled energy, and they move on different news. Then write down, in one line, what would make you trim it, and bring that line to your next review. You don't want to pick a sell rule in the middle of a storm. Nobody shops for an umbrella in the rain.