Middle Distillates
Market Overview
Diesel: ULSD looks to defend itself
Diesel inventories in the US remain low, keeping arbs closed across prompt loading windows for TC14.
With the US-Iranian conflict threatening to spread from the Strait of Hormuz to the Bab el-Mandeb, and against the backdrop of a ban on Russian diesel exports, Europe is exposed.
As European inventories continue to decline, expect HOGO to weaken, opening the arb for a critical resupply into NWE.
Jet: Pulled by diesel
US jet inventories remain healthy, with builds continuing through July as jet yield holds.
USGC jet diff will need to widen further to overcome the high HOGO to allow USGC jet to move to Europe, as Europe is short jet due to the crisis.
Jet arbs from Houston into Rotterdam have stayed closed, with the region well supplied.
