Business and users of oil that did not buy into the lower for longer talk are giving thanks this Thanksgiving for having hedged their oil, gasoline and diesel purchases. Suddenly, the oil glut that many had predicted would last forever has suddenly turned into a very tight market. Oil futures are in contango for the first time since 2014 as refiners bid up the front months of oil to try to secure supply to meet surging global oil demand. In the U.S. there is already talk of diesel shortages driving up spot prices in some areas. U.S. oil production is still below expectations and shale firms are signaling they are not in a hurry to aggressively raise production until they are sure they can do it profitably. This comes ahead of an OPEC meeting where they are wildly expected to extend production cuts and with increasing geopolitical drama in Venezuela and Saudi Arabia.

Oil supplies are getting tighter. The American Petroleum Institute reported a massive 6.35 million barrels drop in crude oil supply as well as a 1.796 million barrel drop in the Cushing Oklahoma delivery point. That was coupled with a big 1.673 million barrels drop in the undersupplied distillate market signaling to crude that refiners will have no choice but to run full tilt for the foreseeable future. This drove the crude market into contango as traders start to fret about diesel shortages this winter.

Bloomberg News reported that a “diesel shortage in West Texas and New Mexico has sparked demand for truckers to long-haul supplies from Oklahoma, Mansfield says in an emailed notice. They say, “Supply concerns” emerged in Texas markets: Odessa, El Paso, Abilene, Amarillo, Lubbock as well as Albuquerque, N.M. The tightness attributed to refinery turnaround delays from Hurricane Harvey, Explorer Pipeline shutdown and repairs earlier this month, record-high weekly diesel exports. They say mixed with limited supplies, exports have risen significantly out of Texas, causing demand to outstrip supply in the region. Mansfield says, “Prices will likely reflect the limited supply situation in the coming days”. There are record diesel exports because supplies are tight around the globe. Diesel producers got hit not only with weather and refining issues, but their biggest problem was the underestimation of demand.