European market is for now finely balanced; key factors in early 2025 are the weather and marginal flows from a tight-ish Eastern market

Commentary summary:

– Europe does not yet feel the need to price up to compete with a tighter Eastern market, but E/W may now be structurally tighter for the next few months due to China, requiring Europe to price more aggressively for its marginal barrels.

– The next turning point for European distillate will be Jan/Feb temperatures.

– For 7 of the last 8 weeks, US diesel stockchanges have been above seasonal norms.

Relative arbs into Europe remain in the holding pattern we have seen over the last few weeks with marginal barrels from the Middle East and WCI pointing east and the USG MR arb to NWE closed again.

ICE Gasoil expired last week in mild backwardation and some of this has rolled up into Q1 spreads with refinery hiccoughs in ARA adding a little impetus.

Nothing about Western pricing speaks for particular tightness at this juncture, albeit there is evidently less bearishness around vs early Q4.