Global jet, and Atlantic Basin diesel in the very prompt, exhibit real strength, largely on the back of continuing closed arbs

12 June 2024 Time to read:  minutes



July’s Singapore diesel crack and spread. (Sparta Live Curves)

The Singapore diesel crack and spread have remained relatively flat this week, continuing the trend observed since early May.  


July’s GO E/W, Jubail to Rotterdam LR2 & Sikka to Singapore LR2 freight rates. (Sparta Live Curves)

Similarly, the GO E/W spread has also shown little movement over the past week.  

In the very prompt, South Korean diesel arbitrages are landing most cost-effectively into Singapore, largely due to decreasing regional freight rates and its own reducing FOB premiums.  

However, this advantage faces challenges from AG and WCI diesel arbitrages, which continue to point East rather than West. 

This persistent flow from AG and WCI supports our continuing bearish outlook for Singapore diesel pricing, despite the relative stability in the diesel crack and spread.

Without significant run cuts (there have been some early signs of this coming from Taiwan’s Formosa of late), this market view is likely to persist. 


July’s ICE GO spread and crack. (Sparta Live Curves)

 In contrast to the trends observed in Singapore, ICE GO spreads and cracks have both gained over the past week, deviating from the patterns predicted in our previous week’s commentary.  


July’s HOGO swap & Houston to Rotterdam MR freight rate. (Sparta Live Curves)

A significant factor here is the continued closure of the USGC TA arbitrages to Europe, primarily due to high USGC freight rates.  

Additionally, marginal diesel arbitrages from the Arabian Gulf (AG) and West Coast India (WCI) are continuing to point East, driven by the narrow GO E/W spread and elevated AG/WCI LR2 freight rates.

This dynamic suggests that the bullish trend in European diesel prices is likely to persist until the USGC TA arbitrage reopens.

This relationship is explored in more detail in our recently published white paper (Correlation Analysis Between Diesel USGC/ARA Arbs and GO Futures Time Spread Whtepaper (  


July’s Singapore regrade. (Sparta Historical Forwards)

 Part of the strength in the European middle distillate market can be attributed to the robust jet market.

The Singapore regrade has reached its narrowest seasonal position in the last six years, partly due to substantial jet buying triggered by the Pertamina refinery outage, as noted by our Senior Price Reporter Carrie Ho. 

 Consequently, all Asian-origin jet arbitrages, except those from the Red Sea, are currently closed to Europe.

This closure has already resulted in European jet differentials and spreads finding a floor.  


July’s NWE Jet CIF Diff and Spread. (Sparta Live Curves)

With these arbitrages expected to remain closed for an extended period due to the strong Asian jet market, the strength in European jet differentials and spreads is anticipated to continue into the medium term.

This may also begin to drag when some additional kero volumes back out of the diesel pool.  


August’s HO spread and crack. (Sparta Live Curves)

 HO spreads and cracks have mirrored the trend seen in European markets this week, both exhibiting gains, contrary to our prediction in last week’s commentary.

This development is somewhat surprising given the current robust crude runs in the US.  


US crude runs (EIA data via Sparta)

Our AVP of Analytics notes that “crude has also recovered significantly over the last week, potentially contributing to more bullishness in gasoil.

Positioning data for oil, particularly crude, was very bearish last week, leaving room for upside.” 

Adding to the bullish sentiment is the disparity between falling USGC freight rates and rising rates from the AG, WCI, and South Korea to South America that are currently present.

This has positioned the US as the best diesel arbitrage into South America right now.  


July’s USGC diesel differential. (Sparta Historical Forwards)

However, despite these positive indicators, the continued strength in crude runs, as evidenced by the persistent width of the USGC diesel differential, suggests a bearish outlook for US diesel pricing in the medium term. 

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.

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