Diesel Cracks Lower but Gasoil Backwardation Supported

Diesel cracks are drifting down towards the lows from last week of about 36.9$/bbl for the front month US spread as the market assesses the partial lifting of the Russian fuel exports. Seaborne exports resumed on Saturday but are not allowed to exceed the average of the past 8-months.

• Russia’s Novak earlier claimed that lifting the ban on Russian seaborne diesel has helped stop overstocking and supported refinery runs at major refineries. Russian refineries cut processing rates in early October by 220kbpd from September’s average to lowest in 19-weeks according to a Bloomberg source.
• Gasoil time spreads are holding on the small gains seen late last week with global inventories still low amid seasonal refinery maintenance and despite strong exports from Asia. Dec23-Dec24 has fallen from over 120$/mt to 78$/mt so far this month but is still high compared to an average below 22$/mt in Q2.
• Exports of refined products from China in September are estimated to have been 4.01m mt, up 28% compared to August, according to OilChem.
• Americas East Coast diesel imports made a counter-seasonal return in September after several months at or below last year’s levels according to Kpler.

• Conflict in Israel should bring an increase in oil volatility, especially for diesel markets due to speculative variations according to Petrobras CEO Jean Paul Prates.
• ICE Gasoil net long positions edged down again last week to the least bullish since 18 July but Nymex diesel positions were the most bullish since Oct 2021.
  • Gasoil OCT 23 up 1.7% at 883.25$/mt
  • ULSD NOV 23 up 1.5% at 2.94$/gal
  • Gasoil OCT 23-NOV 23 up 1$/mt at 23.25$/mt
  • Gasoil DEC 23-DEC 24 up 4.75$/mt at 78$/mt
  • EU Gasoil-Brent down -1.1$/bbl at 24.6$/bbl
  • US ULSD crack down -1.6$/bbl at 37.77$/bbl