ICE GO spreads shatter records above $85/mt as escalation bites; Rhine adds a wildcard to the bull case

• ICE GO spreads shatter records above $85/mt as escalation bites; Rhine adds a wildcard to the bull case
• Under continued pressure from military escalations, Aug/Sep ICE GO spreads have moved up to over $85/mt currently, with the August ICE GO crack trading for parts of today above $80/bbl. These are numbers hardly ever seen before: unprecedented for summer months and almost unprecedented for winter months too.
• HO and Singapore diesel spreads and cracks have followed, though not quite as severely, as evidenced by the declines in both the August HOGO and the GO e/w.
• This strength in ICE GO has still not been enough to open arbs from the USGC on MRs. US diesel stocks remain very low outside of PADD 3, and the USGC is absorbing significant pull from Brazil as Russian refinery issues persist. Nor has it been enough to point WCI ULSD LR2s West over East, with Singapore diesel premia particularly strong at present.
• We should expect continued gains in ICE GO spreads and further declines in the HOGO and GO e/w as a result.

Two caveats stand out:

• Governments must be approaching the point where they seriously consider SPR releases for both diesel and crude. On the crude side, my colleagues have already flagged that a higher flat price is likely to trigger another IEA SPR release.
• Rhine water levels are becoming critically low, presenting a somewhat bearish view for ARA via reduced demand down the river. This is no longer a marginal concern: Kaub gauge readings have collapsed to the 27-32cm range this week, within sight of the all-time record low of 25cm, but ARA diesel stocks have already fallen to their lowest since August 2022.
• That said, Sparta’s own internal debate this morning is interesting to share: the immediate impact may be for stock to build in ARA (bearish spreads) rather than clear down-river, with a bullish crack impact only materialising if inland refineries are forced to cut runs, a more extreme and less likely outcome.

(August’s HOGO swap)

(August’s GO e/w)

(August’s RBHO swap)

(Rotterdam: Desel)

(Sikka LR2s: Diesel)

(August’s ICE GO crack)

About the Author
James Noel-Beswick | Head of Commodities, Sparta Commodities
James is Head of Commodities at Sparta, leading the distillates vertical and covering the full oil barrel. He held analyst roles at BP and Shell before joining Sparta, and his market commentary is regularly cited by Reuters, Bloomberg, Financial Times, New York Times, the Wall Street Journal, and BBC News.
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About Sparta
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