Middle Distillates
Market Overview
Diesel
E/W gasoil has sold off massively in recent days, Chinese offers are understood to be a contributor of this.
Ice gasoil spreads have also followed this trend, coming off sharply from previous highs, and will remain under pressure from expected arb cargo arrivals (see next slide).
But cracks spreads still remain stubbornly high and underline the longer term shortfall in the diesel production required from refineries.
Russia's diesel export ban is likely to be extended through September, continuing the tightness already felt by the market
E/W weakness has helped Sikka export arbs to point firmly west on LR2 parcels.
LR2 arb margins for cargo into NWE/MED are above those for Singapore and Australia consistently across the forward curve.
Arb margins for LR2 cargo via Cape to Europe is in the money going forwards from December, while the shorter Suez route is close to breakeven at the prompt (LR2 to Med).
Kero
Jet diffs in Europe remain under pressure and are now back to pre-war levels, a stark difference to the state of the European (and global) diesel market.
As well as the sharp decline in E/W diesel, SG Regrade has also moved firmly into negative territory and is helping keep wide open arb opportunities westwards.
