Signal Brief: Diesel Shock: Markets reel as supply fears grip diesel globally

Distillate Signal Brief: Distillates in Turmoil: Middle East crisis sends diesel and jet soaring

• In many respects, the impact has been even more severe in diesel than crude even, with companies and governments across West and East Asia cutting refinery runs and issuing export bans on refined products.
• Mar/Apr ICE GO spreads have surged past $110/mt, March ICE GO cracks above $54/bbl despite strong crude, March HO spreads beyond 40cpg and HO cracks above $70/bbl.
• The reaction in the US has been even stronger than in Europe. March HOGO has risen by more than 12 cpg since Friday evening, likely to shield supply in PADD 1 and 2, closing the USGC MR ULSD arb to Europe by over $50/mt.
• Asia’s reaction appears sharper still, with several export bans. Mar/Apr Singapore diesel spreads exceed $24/bbl, cracks top $55/bbl, and the March GO E/W has swung positive; trading above $50/mt earlier today and now above $30/mt.
• WCI LR2 ULSD cargoes clearly point East, with Indian exporters noting that if margin differences are marginal, barrels head East simply to avoid origin scrutiny.
• Even Red Sea LR2 ULSD arbs into Europe appear shut.
• With both US and Asian barrels closed or pointing away, ICE GO spreads and cracks should yet climb further, even from these extremes.

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