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Refinery Run Cuts and Diesel Positioning Drive Crack Strength: FGE

DIESEL

Refinery outages and run cuts, increasing managed money net long positions and the loss of medium-sour crude from the market are contributing to the recent diesel crack spreads strength according to FGE.

  • The recent extension of the Saudi voluntary cut will extend support for middle distillate cracks throughout 3Q.
  • Refinery outages and run cuts have reduced middle distillate availability. Refiners have cut runs amid extremely high temperatures in southern Europe and the Atlantic Basin has seen several outages with another 250kb/d of unplanned outages in Asia.
  • FGE expects a 300kb/d drop m/m in Asian gasoil surplus in September (excluding China) due to autumn refinery maintenance and an expected uptick in demand after the monsoon season.
  • The managed money long-to-short ratio on 1 Aug was 7.9:1 the highest since August last year.
  • Loss of medium-sour crude from market has reduced vacuum gasoil and residue availability.
  • The US and European diesel crack spreads have eased back slightly this week from a peak on 3 Aug after the strong rally seen in July according to Bloomberg data.
    • EU Gasoil-Brent down -0.7$/bbl at 29.97$/bbl
    • US ULSD crack down -1.2$/bbl at 43.67$/bbl
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