Peace hopes fade, diesel soars
‘- May ICE gasoil spreads have surged close to $20/mt this morning, with cracks following, as markets digest the weekend’s failed peace talks.
– May heating oil spreads, softer since mid-week, have recovered by nearly 6 cpg this morning; HO cracks have tracked ICE GO higher.
– The May HOGO has consequently narrowed by over 5 cpg; not yet enough to crack USGC ULSD MR arbitrages fully open, though they sit tantalisingly close; EC Canada MR, and USGC LR1 and LR2 arbs are workable. Further HOGO compression is likely.
– May Singapore diesel spreads jumped over $1.50/bbl, responding to the peace-talk failure and Trump’s threat to double-blockade Hormuz; the crack has mirrored ICE GO and HO.
– The May GO East-West has edged higher mid-week; April’s equivalent remains extraordinary, above $125/mt, keeping WCI ULSD LR2s firmly pointed East.
– India has sharply raised diesel and jet export levies, though with Reliance’s Jamnagar SEZ exempt, meaningful supply withdrawal looks unlikely; the more watchable effect is refinery yield optimisation at the margin.
– Upward momentum looks far from exhausted; the natural ceiling is pre-ceasefire levels, which, given Trump’s Hormuz threats, may prove a floor rather than a cap. Europe and Singapore offer the most compelling headroom.
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