European distillates price for Iran disruption… sort of

Commentary summary:

• Acknowledging that pricing will not be terrible efficient between E/W, relative spreads, premiums, and freight, ICE GO still looks a little undervalued.

• Jet arbs are open to Rotterdam from Singapore with E/W moves much larger than on diesel.

• HOGO strength, partly on RVO (due to mandate proposals), mean swing arbs signals into Europe are, remarkably, closed. This may not last long.

The recent strong gains in ICE GO cracks are certainly justified if still reasonably subdued given what is at stake. Shipping disruptions already emerging this week (signal jamming headlines, navigation difficulties) also highlight the risk of unintended consequences, even without a full closure of the Strait of Hormuz. Additionally, attacks on Israel’s Haifa refinery, which has led to a complete shutdown of all units, underscore the vulnerability of refining infrastructure in the region.

James Noel-Beswick is Commodity Owner for Sparta. Before joining Sparta, James worked as an analyst for likes of BP and Shell and leads our continued development of the distillate product vertical.