Demand for shipping diesel by rail within the United States surged in March, another sign of how the war in Iran has disrupted trading patterns and left the world scrambling for the vital fuel.
Shipping refined oil products by rail is typically a more expensive option than sending it by pipeline. But the war in the Middle East and the virtual closure of the Strait of Hormuz is depriving the market of hundreds of millions of barrels of crude and refined fuels. Global demand for US products is climbing to try and fill some of the void and the country appears poised to set a record for weekly diesel exports this week, according to data from energy analytics firm Vortexa.
Requests to store distillate fuel in tanks with a railroad connection soared to 250,000 barrels in March, up from 30,000 barrels in February and none in January, according to The Tank Tiger, a terminal storage clearinghouse. And as of last week, there have already been requests for 125,000 barrels worth of storage in April.
All of those requests occurred on the East Coast and Gulf Coast, the key export hubs for the fuel.
Meanwhile, stocks of the fuel are falling and near their lowest since last July on the Gulf Coast. That could mean Midwest refiners may see an opportunity to profit by exporting diesel overseas. To do that, they need to send their fuel to the coasts. While those shipping routes are possible by pipeline to the East Coast, it could be economically viable to send the fuel by rail-car for export, said Andy Lipow, president of Lipow Oil Associates.
And while pipelines connect the Midwest and the Gulf Coast, it's not possible to send physical product all the way to the coast from the Midwest on a pipeline -- meaning a rail-car or a barge become the only viable options to send fuel for export in that direction, Lipow said.
Nationally, 9,112 rail-cars worth of petroleum products were delivered to terminals in March, up nearly 10% from March 2025, according to The Tank Tiger's data.
"Exports from the coast can be attractive for Midwest refiners, particularly for diesel, when shortages overseas strengthen export economics and justify moving barrels toward coastal outlets," said Steven Barsamian, chief operating officer at The Tank Tiger.
Diesel is vital to the world economy because it powers essential freight, construction and agriculture sectors. The longer the Strait of Hormuz remains effectively closed, the more intense the competition for oil and products is likely to become.
The pull on supplies has also raised the cost of diesel off the Gulf Coast above futures prices at times during the conflict, an unusual development given the region's typically abundant supplies. Meanwhile, diesel in Chicago has priced cheaper compared to futures - 26 cents below the benchmark as of Tuesday, as opposed to 11 cents on the Gulf Coast or five cents above in New York - opening the opportunity for buyers to profit by selling Midwest fuel on the coasts.
The rising demand for railroad-connected storage may be indicative of traders and firms taking advantage of those arbitrage opportunities, Barsamian said.
The rail transports are the latest example of the war leading to unusual trade flows in the US. US pipeline operator ONEOK has flipped a portion of its Magellan pipeline that typically runs north from Frost, Texas, to Tulsa, Oklahoma. Instead, the pipeline is sending fuel south to Texas as stockpiles fall in the region.