Diesel Cracks Extends Decline On Weak Demand Concerns

Diesel cracks are extending the decline from yesterday due to global demand concerns to lose some of the gains seen earlier this week. Low US inventory levels and potential refinery runs cuts in Asia due to the low margins are still providing some support.

• US diesel exports to Europe increased more than three times the April rate and the fastest rate in data going back to 2017 according to Bloomberg.
• US Gulf Coast shipments to Europe are at 463kb/d so far this month with arbitrage economics supported by cheap freight. Transatlantic freight from the Gulf Coast has fallen to the lowest in three months.
• Higher US volumes to Europe offset a drop in exports to Latin America as cheaper Russian diesel flows replace US supplies into Brazil.
• Data this week showed US distillate stocks 15.75% below the five year average, European ARA Gasoil stocks 14% above normal and Singapore Middle Distillates inventories 28.5% below average.
• China has lowered the oil products export quotas in the second batch of 2023 to 12m tonnes quotas compared to 18.99mn tonnes in the first batch although still well above last year’s levels and above previous expectations.
  • US ULSD crack down -0.8$/bbl at 26.79$/bbl
  • EU Gasoil-Brent down -0.7$/bbl at 14.75$/bbl