Diesel Yields Expected to Drop in Q4 vs Last Year: Wood Mackenzie

Limited supply of medium and heavy crudes to refiners due to Saudi Arabia and Russia curbs is helping to cut production of diesel fuels. Lower refining yields have been an important bullish factor in diesel prices, with supply also curbed by plant outages according to Wood Mackenzie.

• The proportion, or yield, of diesel refiners make is expected to drop 1.5% next quarter from a year earlier. This loss equates to 1.2mbpd won’t be fully compensated by higher overall processing rates. Refineries are expected to process an extra 2.4mbpd of crude next quarter compared with a year earlier.
• OPEC+ cuts have spurred refiners to process crude with a lower density resulting in proportionally less output of diesel-type fuel and plants have also been focusing production on other products, said Mark Williams at Woodmac.
• Increased jet fuel demand this summer has been a major driver of lower diesel yields while gasoline has been boosted by a tight Atlantic basin market.
• Plants will find it harder to raise relative diesel output this year, as is typical in Q4, due to the OPEC+ crude cuts and a stronger focus on jet fuel output.
• Overall, the supply of diesel-type fuel is seen falling by 400kbpd.

Source: Wood Mackenzie / Bloomberg