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Weaker EU Diesel Cracks Expected in Coming Weeks

DIESEL

Physical diesel cracks in northwest Europe are set to weaken over coming weeks then stay flat through the summer, according to Mark Williams at Wood Mackenzie.

  • NW Europe physical ULSD margins should then pick up in September-October.
  • High imports of gasoil/diesel, including from the US have weighed on prices as well as lackluster European demand due to the end of heating oil season and low manufacturing PMI data.
  • Refiners are incentivized to keep processing rates relatively high amid fairly healthy overall refining margins.
  • FGE also see slightly lower ULSD cracks for NW Europe in May-June but back up to around $18/bbl on average in July-August and $25/bbl in December.
  • The European Gasoil-Brent front month spread is today around $17.4/bbl according to Bloomberg.

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