Diesel Bulls Fueled by Low Reserves and Supply Disruptions: Sparta

Recent strength in ICE gasoil cracks and spreads is underpinned by a “prevailing bullish sentiment across Europe and the wider Atlantic Basin,” according to a note from Sparta Commodities.

• “This is being fuelled by low stockpiles and disruptions in Middle East and Russian supplies,” according to Sparta’s analyst James Noel-Beswick.
• Sparta said that the Red Sea situation continues to hold significant sway over arbitrage flows. Currently, only Red Sea diesel arbs via the Suez and Eastern Canada arbs are open to Europe.
• “Moreover, a positive outlook for demand resonates on both sides of the Atlantic, bolstered by signals from central banks indicating a move towards lower interest rates and improving manufacturing industry sentiments,” the note added.
• Sparta also expect ICE gasoil cracks and spreads to continue an upward trajectory into at least the medium term, providing there is no substantial change in the Middle East situation.