Diesel Markets Still Bearish Amid Soft Demand

Diesel crack spreads and time spreads continue to decline this week with soft demand weighing on prices. The prompt Gasoil spread has this week fallen into contango for the first time since May 2023.

• EIA data this week showed the four week average implied distillates demand fell further in the week to April 12 to the lowest since the week to Jan. 19. Demand was below the previous five year range and 6.1% below the average for the time of year. US demand has seen the worst start to a year since 2016 averaging 3.66mb/d so far in 2024.
• Diesel sales in Europe including Germany, Italy and the UK are showing year on year declines and French sales of both non-road and road diesel fell by 12% y/y in March.
• Weak domestic demand in China is also supporting higher diesel exports.
• Data this week showed a dip in global diesel stocks with US distillate stocks 7.3% below the five year average, European ARA Gasoil stocks 2.1% below normal and Singapore Middle Distillates inventories 9.6% below normal.
• Global supply concerns from a drop in Russian diesel exports amid disruption and maintenance to refineries has provided little support to the market. Russian diesel exports averaged 0.74mbpd in the ten days until April 13, down by around 23% from the 2019-2023 average, Kpler data showed.
• Bearish fundamentals include sluggish economic recoveries, and a significant increase in diesel production capacity in Africa, the Middle East and Mexico, according to Sparta Commodities.
  • Gasoil MAY 24 down 0.8% at 772$/mt
  • ULSD MAY 24 down 0.6% at 2.52$/gal
  • Gasoil MAY 24-JUN 24 up 0.25$/mt at -2.25$/mt
  • Gasoil JUN 24-DEC 24 down 1.5$/mt at 7$/mt
  • EU Gasoil-Brent up 0.1$/bbl at 17.69$/bbl
  • US ULSD crack down 0$/bbl at 23.85$/bbl