Diesel

Market Overview

Long HO spreads due to persistent US diesel tightness

Diesel - Market Overview

US refiners are striving for higher gasoline output as peak demand season is now underway. However PADD 3 transatlantic (NWE/WAF) and LATAM arbs are holding firm, with persistent weakness in TC18 and TC14 rates.

Concerns over European distillate supplies have subsided recently, as seen via Ice gasoil spreads, due to a combination of higher imports (from US and East), SPR stock draws and pockets of demand destruction. These fundamentals also support pricing for HOGO, but recent gains in the regional arb somewhat cap risk/reward.

As a result, we expect US stocks to remain tight going forwards. The fresh multiyear low below 101mb bbls reached at the end of May is unlikely to be the floor.

All the key signals point to a calm European jet market

Jet - Market Overview

Fears over an acute shortage of jet supply in Europe have faded in May. Yield shifts driven by the extreme pricing seen previously and stock draws seem to have 'done the work', despite no material increase in jet exports to Europe via the Strait of Hormuz.

NWE jet cargo regrade and barge cracks have weakened and E/W values have also narrowed, indicating a limited pull factor to bring cargoes from Asia.

Arb pricing for cargoes from major sources also reinforces this as West Coast India and South East Asia economics have weakened, but US origin cargoes are still stable.