Middle Distillates
Diesel - Arbs, Diffs, and Spreads
Cold weather from winter storms caused the rally in HO pricing in mid-January.
High stocks in PADD 3 against record low PADD 1 stocks leads to record lows in USGC 10ppm/diff.
Over 100+ WS rally in TC14, due in large part to tight freight fundamentals, looks set to reduce diesel exports. Leading to a weakening in HO spreads.
With USGC/NWE maintenance upcoming, low yields, and Ukrainian drone strikes resuming provides upside risk to the HO market...
WCI/AG swing barrels pointing eastward set floor on medium term GO spreads.
Jet - PADD 5 + PADD 1 US imports
The arbs into PADD-5 trans-pacific jet arbs remain open as Benecia closure begins in February.
Despite recent declines in the Ulsan to LAX, we continue to expect that this arb is likely to remain open despite the El Segundo restart in the coming weeks.
Jet demand will seasonally rise from here, keeping fundamentals well aligned...
