Limited Diesel Stock Build May Continue to Support Diesel Spreads: BofA

Diesel cracks and timespreads may continue to “roll up” in the near term as inventories seem unlikely to rebound materially during fall maintenance according to Bank of America on 29 Aug. Increased refinery runs and soft demand could drive lower cracks versus the curve in 2024.

• “Diesel’s recent strength is grounded in the refining industry’s inability to boost supply despite exceptional margins.” Supply has been limited by hydrocracker outages at the highest since 2020 and slower than expected refinery starts for Al-Zour and Jazan.

• OPEC+ cuts have also reduced supplies of diesel-rich medium and heavy sour crude.
• Jet fuel availability for blending into the diesel pool has been limited with utilization rates restricted by hot weather and with recovering air travel.
• Demand however has been weak, with OECD diesel usage falling 240k b/d y/y during Jan-Jun and China’s appetite likely unchanged y/y.