Limited transit through the Strait is set to keep diesel firmly bullish
‘- Following yesterday’s ceasefire announcement followed by a lack of transit through the Strait of Hormuz, the physical picture remains generally unchanged.
– This has had the expected impacts on pricing one would assume for the diesel market, as GO E/W for May has returned to a +$11/mt value despite declining refinery utilization in Europe.
– Diesel arbs to Singapore have closed for USGC exporters, as declines in SG sales premiums and GO E/W spreads made the arb unworkable for the prompt loading window.
– We expect HOGO values will continue to weaken in order to reopen the Houston–Rotterdam diesel arbitrage. (With the caveat that this pricing action should remain in place while the Strait remains effectively closed until US to NWE arbs open)
– Notably, NYH enjoys export margins toward WAF and NWE for the 10th–16th loading period. This should in time pressure USGC 10ppm up-down spreads lower, given current US diesel fundamentals.
– As the Strait remains closed (effectively or upon escalation), spreads and cracks are likely to gain over the coming weeks as physical oil supply remains constrained globally.
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