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Weaker US Manufacturing Data to Put Pressure on Diesel

OIL PRODUCTS

A stagnant manufacturing sector is likely to keep the pressure on diesel markets, which are under pressure with the prompt structure in contango.

  • US manufacturing contracted in April after briefly expanding in March. The ISM manufacturing index missed in April, falling to 49.2 (cons 50.0), while the S&P Global US manufacturing PMI was 50.0 (prelim and cons 49.9) in April.
  • Diesel demand is often used as a fuel in the manufacturing sector, and the stagnant activity will offer little reprieve for the product.
  • Four-week average US distillates implied demand remains well below seasonal normal levels and down 8.3% on the year.
  • The recent manufacturing data, coupled with returning refinery runs, are likely to provide further downside to diesel prices, with diesel cracks already at a 13-month lows.
  • Worsening the outlook are also rising prices in the sector, with the Chicago Business Barometer, produced with MNI showing prices paid rose 6.7 points to 69.3, the highest level since August 2023.
  • This could fuel more hawkish sentiment in the Fed, which in turn will stifle further potential diesel demand.
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A stagnant manufacturing sector is likely to keep the pressure on diesel markets, which are under pressure with the prompt structure in contango.

  • US manufacturing contracted in April after briefly expanding in March. The ISM manufacturing index missed in April, falling to 49.2 (cons 50.0), while the S&P Global US manufacturing PMI was 50.0 (prelim and cons 49.9) in April.
  • Diesel demand is often used as a fuel in the manufacturing sector, and the stagnant activity will offer little reprieve for the product.
  • Four-week average US distillates implied demand remains well below seasonal normal levels and down 8.3% on the year.
  • The recent manufacturing data, coupled with returning refinery runs, are likely to provide further downside to diesel prices, with diesel cracks already at a 13-month lows.
  • Worsening the outlook are also rising prices in the sector, with the Chicago Business Barometer, produced with MNI showing prices paid rose 6.7 points to 69.3, the highest level since August 2023.
  • This could fuel more hawkish sentiment in the Fed, which in turn will stifle further potential diesel demand.