Reduced Chinese distillate exports lend real strength, but for how long with crude runs, particularly in the US and Middle East returning

Commentary summary:

• USGC arbs closed into Europe but with runs returning this should change in the medium term.
• Both jet and diesel AG/WCI arbs point East.
• HOGO continues to widen but for how long before we start to see US distillate stocks build? Whilst this happens the GO E/W narrows dramatically to levels not seen since Summer 2023.
• China severely reduced jet exports and now imports jet, in a rare move, due to increased air passenger demand.
• There is an argument to be long diesel in the very short term but the moment to go short feels relatively close. Jet strength has a longer way to run.

The Singapore diesel crack, spread, and sales premium have all strengthened since early October. East Asia’s currently robust jet market has assisted here, a trend worth deeper analysis later in this piece, whilst a continued strong VLSFO market will also be drawing gasoil volumes at the margin with the diesel/VLSFO spread down under $100/mt.

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.