Tight Market and Supply Risks Supporting Diesel Backwardation

The European Gasoil curve remains in strong backwardation despite the softening of diesel crack spreads over the last few weeks. Crack spreads are still seeing support from tight supplies during the current refinery maintenance season while global inventories remain below normal.

• Uncertainty surrounds diesel exports from Russia after the partial easing of the fuel export ban. Russian seaborne diesel exports fell by 20% to about 1.1m metric tons in the first 15 days of October vs the same period September according to LSEG. Russia’s Deputy PM Novak has ordered domestic refiners to raise winter diesel output to ensure domestic demand is met.
• Gasoil time spreads are edging lower today having seen gains last week amid wider market concerns over supplies from Middle East. The prompt spread is currently around 28$/mt compared to a peak of 39$/mt in early September but well above between 10-15$/mt in August.
• The Dec23-Dec24 spread has following a similar pattern and currently at 82$/mt compared to lows of below 20$/mt in Q2 2023.
• The front month US diesel crack spread has recovered from an intraday low of 43.6$/bbl back to near flat on the day at 45.5$/mt.
• Gasoil NOV 23 down -1.8% at 909.5$/mt
• ULSD NOV 23 up 0.1% at 3.15$/gal
• Gasoil NOV 23-DEC 23 down -2.75$/mt at 28$/mt
• Gasoil DEC 23-DEC 24 down -11$/mt at 82$/mt
• EU Gasoil-Brent down -1.1$/bbl at 28.25$/bbl
• US ULSD crack up 0$/bbl at 45.55$/bbl