Riding distillate coattails or genuine market tightness?

Commentary summary:

• November has so far been a repeat of the start of Oct and the start of Sept, with M1 cracks and M1/M2 spreads rising gradually on ongoing market tightness

• PADD-3 components prices continue to be largely unconcerned by very low inventory levels, lagging behind their equivalents in ARA as Houston remains an attractive source of supply to much of LatAm

• The WAF arb has done a lot of the work to really tighten up the European market, with octane seemingly the chokepoint as higher-octane components price higher despite broader light ends inventories reportedly not looking particularly tight in ARA/NWE.

• In the East, a lack of Chinese exports and ongoing outages are keeping product markets tight. Arbs out of Singapore are closed across the board (with the exception of stable arbs into Australia and slightly-less typical USWC arb), but blend margins remain closed, signaling genuine market tightness in the East.

Philip Jones-Lux is Senior Analyst for Sparta. Having worked with organisations such as JBC Energy and RP Global, Philip is a seasoned energy market analyst with expertise across the oil barrel and power markets

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