Not yet time to go short on macro as prompt physical remains buoyant

Commentary summary:

• Generally speaking, global distillate markets continue to show prompt tightness.

• Asian diesel is showing supply-driven tightness while jet is also buoyant in the Atlantic.

• ICE LSGO spreads are less buoyant and didn’t react much to Spanish refinery outages but the arb picture looks liable to put a floor under spreads for now.

• The HOGO and Nymex HO spreads have now corrected lower with the market relaxed about PADD-1 supply with refineries returning; but another draw in P1 might get interesting.

• USGC FOB prices have also plummeted, helping keep open the MR arb to NWE. This may be the main drawback on Atlantic spreads.

• The main bull case for Europe short-term is the arb picture, alongside one-off factors such as refinery closures, with Grangemouth having stopped processing crude this week.

We don’t see enough reasons to be short prompt ICE GO spreads (or global cracks) for the immediate short-term, with arb signals into Europe not overall indicative of big inflows in this month, and macro data still not weak enough (evidently this can change fast).

Neil Crosby is an experienced energy market and commodity analyst, specialising in crude oil, oil products, biofuels, and carbon. With roles at OilX and JBC Energy, he has extensive expertise in global oil industry analysis, forecasting tools, bespoke research, and client communication. His focus on refining and petrochemicals underscores his specialisation.