Diesel Spreads Regain Ground Heading into Winter Heating Season

Diesel cracks are regaining ground this week to reverse much of the decline seen during the second half of October amid tight supply concerns and low inventories.

The front US crack spread is up from nearly 38.4$/bbl on 30 Oct back to 45.78$/bbl today and compared to the peak of around 48.35$/bbl on 16 Oct.

• Tight supplies and low stock levels in Europe and US are supportive heading into the winter heating season. US distillates inventories remain 12.4% below the five year average with a record low for the time of year on the US East Coast. The return of refineries from seasonal maintenance could help to ease some of the tight market concerns.
• German diesel/gasoil consumption in October is expected to have risen by 15% on the year to 1.15mbpd, as consumers have started stockpiling heating oil ahead of the winter according to FGE.

• EIA data yesterday showed a small draw in distillates stocks with a drop in production and product supplied on the week. EIA data yesterday showed a decline in weekly diesel demand taking the four week average implied demand down to the low end of the previous five year seasonal range.
• Gasoil backwardation has followed the move higher this week with the prompt spread approaching highs seen in mid September. The move in the Dec23-Dec24 spread has been more muted but is back up over 82$/mt from a low of nearly 60$/mt earlier this week.
  • Gasoil NOV 23 up 0.8% at 900$/mt
  • ULSD DEC 23 up 1.7% at 3.01$/gal
  • Gasoil NOV 23-DEC 23 up 3.5$/mt at 37.5$/mt
  • Gasoil DEC 23-DEC 24 up 4.25$/mt at 80.5$/mt
  • EU Gasoil-Brent up 0.7$/bbl at 28.11$/bbl
  • US ULSD crack up 1.4$/bbl at 45.31$/bbl