DIESEL: Near Term Gasoil in Backwardation Amid Lower Refinery Runs

The near-term European Gasoil forward curve has returned to backwardation during the last week after trading in contango since mid July. The rise in near term spreads is supported by the European refinery maintenance season, run cuts driven by the low margins and ahead of an expected demand pickup into the winter season.

• Repsol’s Spanish refineries are expected to lower runs by 5% and ENI is cutting runs by as much as 10% at some of its European locations due to weak margins. Polish refiner Orlen however sees “no grounds for limiting throughput.”
• Despite the support for the prompt spread, the bearish trend remains in place for the longer dated Dec24-Dec25 spread amid ongoing global economic growth concerns. The spread yesterday reached the lowest since early 2021 at -$14/mt.
• European gasoil demand is forecast 3% lower than 2020 amid weak manufacturing and a structural shift in the car fleet, according to IEA cited by Bloomberg. EIA data last week showed a fresh decline in weekly implied distillates demand while the four week average is still below seasonal normal levels.
• European ARA Gasoil stocks were last week 10.6% above the five year average after gains since early August, US distillate stocks were 8.7% below normal while Singapore Middle Distillates have fallen to near normal levels.
  • Gasoil OCT 24 up 0.3% at 644$/mt
  • ULSD OCT 24 down 0.1% at 2.1$/gal
  • Gasoil OCT 24-NOV 24 up 0.25$/mt at 1$/mt
  • Gasoil DEC 24-DEC 25 up 0.75$/mt at -12$/mt
  • EU Gasoil-Brent down 0$/bbl at 13.6$/bbl
  • US ULSD crack up 0.1$/bbl at 17.77$/bbl