Diesel Markets Ease Back from Tight Supply Driven Rally Yesterday

Diesel product supplies remain tight with refinery outages likely to keep stocks low despite a build in US inventories and drop in demand according to EIA data yesterday. Diesel cracks are today trading slightly lower after seeing a rally yesterday with the US spread just below the highest since Jan seen in late August.

• Limited supply of medium and heavy crudes to refiners due to Saudi Arabia and Russia curbs is also helping to cut production yields of diesel fuels according to Wood Mackenzie.
• The ICE Gasoil curve backwardation continues to strengthen with Dec23-Dec24 setting another high of 119$/mt today and with the Oct-Nov holding near the high from late August.
• Two key refineries outages on the US East Coast from mid-September for six to eight weeks could tighten oil product supplies from the already low inventory levels ahead of the winter. The US East Coast will lose about 120kbpd of distillate fuels from the Irving Oil's refinery and Delta Airline's Trainer refinery according to Reuters.
• Petrobras is to carry out a turnaround at the 151k b/d Regap refinery in Brazil between September and November with planned work to affect some units involved in diesel production.
• Total US distillates stocks are still 12.5% below normal despite a build last week according to EIA weekly data yesterday. Four week average implied distillates demand fell on the week to remain at the low end of the previous five year seasonal range.
  • Gasoil OCT 23 up 0.1% at 990.75$/mt
  • ULSD OCT 23 down -0.5% at 3.42$/gal
  • Gasoil OCT 23-NOV 23 up 0.25$/mt at 37$/mt
  • Gasoil DEC 23-DEC 24 up 0.75$/mt at 115.5$/mt
  • EU Gasoil-Brent down -1$/bbl at 35.47$/bbl
  • US ULSD crack down -1.3$/bbl at 54.35$/bbl