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OIL PRODUCTS: Risk of US and EU Refining Run Cuts from Q4: Energy Aspects

OIL PRODUCTS

The risk of refining run cuts in the US and Europe will accelerate starting in 4Q, according to Energy Aspects.

  • The NW Europe ULSD crack versus Brent is forecast at $20/bbl for Q3 and $20.90/bbl for Q4.
  • The jet fuel crack is forecast at $19.5/bbl for Q3 and $20.30/bbl for Q4.
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  • Current forward margins point to global run cuts of 1mb/d in October so firmer cracks will be needed or crude differentials will have to soften.
  • A shallow contango in prompt ICE gasoil spreads is expected with European diesel inventories to build by 17.2mbbl during July-August.
  • Export flows from the US Gulf Coast to Europe to stay firm assuming no hurricane disruptions while Middle East to Europe flows should also stay high.
  • PADD 1 heating demand is expected to be 78kb/d higher y/y in winter, curbing transatlantic flows so Europe could look to India or China for winter import requirements.

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