Trump’s ceasefire announcement takes effect but it will take time for this to really be seen in global diesel and jet pricing

Commentary summary:

• USGC ULSD arbs close into Europe. All arbs apart from USGC diesel arbs closed in Singapore.

• WCI ULSD LR2 arbs continue to point East. Whilst all Asian jet arbs remain closed into Europe and the US West Coast.

• All global diesel and jet spreads and cracks find a firm ceiling after Trump’s ceasefire announcement.

• Whether the ceasefire holds or not, it will take time to correct/repair the damage to diesel and jet infrastructure, stocks and supply chains. The outlooks remains bullish.

A tentative ceasefire announcement from the Trump administration has provided a brief moment of respite for global fuel markets, but traders would be unwise to mistake a pause in the fighting for a resolution to the supply crisis that has gripped diesel and jet markets for weeks.

(May’s Singapore diesel spread and crack)

May Singapore diesel spreads and cracks had been grinding relentlessly higher for much of the past week before hitting a firm ceiling in the past twenty-four hours, the immediate consequence of Washington’s announcement of a two-week halt to Middle East hostilities.

(May’s GO and Jet E/W)

The May GO E/W told a similar story; having continued to climb, it has since retreated into negative territory. On paper, the numbers look like relief. In practice, the picture is considerably murkier.

Continuing strikes on Iranian infrastructure by US and Israeli forces, alongside retaliatory Iranian attacks on Gulf Cooperation Council facilities, cast serious doubt over the ceasefire’s durability.

Markets may have taken the headline at face value; the physical reality on the ground suggests considerably more caution is warranted.

And even in the optimistic scenario where the ceasefire holds, the damage already done to refinery capacity, port infrastructure and regional supply chains will not be repaired overnight.

Elevated Singapore diesel pricing, on any honest assessment, is a story measured in months rather than weeks.

(Singapore: Diesel)

The arbitrage picture offers little comfort to those hoping for a swift normalisation. All global diesel supply routes into Singapore remain closed in the very prompt, though the softening in global pricing following the ceasefire announcement appears to have cracked open a narrow window for USGC cargoes arriving in Singapore in June. Though almost the whole globe now wants these USGC diesel cargoes.

(Sikka LR2s: Diesel)

West Coast India ULSD loadings on LR2 tankers continue to point firmly eastward, and even accounting for the weakening in the East-West spread, that directional bias holds all the way out to November loadings when Cape routing is factored in.

(May’s Singapore kerosene spread and crack)

(May’s Singapore regrade and Jet E/W)

The jet market has followed a broadly similar trajectory, though with one notable divergence: the Singapore regrade has actually gained ground and moved back into positive territory following the announcement, with the jet East-West spread recording comparable gains.

(Rotterdam: Jet)

The result is that virtually all global jet arbitrages into Europe remain firmly shut, with the sole exception of US-loading MR tanker cargoes (and perhaps Dangote jet loaders).

(EIA via Sparta)

(EIA via Sparta)

American jet stocks and refinery yields are, admittedly, in robust health; though that is emphatically not the case on the West Coast, where Los Angeles continues to face closed inbound arbitrages from both North and South-East Asia, a tightness that is echoed along the Pacific coast of South America as far south as Chile.

(Los Angeles: Jet)

(May’s NWE Jet CIF differential, spread and crack)

For European jet buyers, the arithmetic is uncomfortable. With supply routes closed and infrastructure recovery likely to be protracted, the bullish case for EU jet pricing remains firmly intact; ceasefire or not.

The two-week ceasefire announced by the Trump administration has left its fingerprints across the Atlantic fuel complex just as visibly as it has in Asia, delivering a sharp ceiling to a rally that had been building with considerable momentum throughout the week.

(May’s ICE GO spread and crack)

(May’s HO spread and crack)

May ICE GO and HO spreads and cracks had both been grinding higher for much of the past seven days before running squarely into the ceasefire headlines, mirroring the abrupt stalling seen in Singapore diesel and kerosene pricing.

The moves had been earned, the underlying supply picture in Europe remains deeply uncomfortable, but the market, as markets tend to do, reacted first and asked questions later.

The April HOGO has been perhaps the most dramatic intraweek story. Having spent much of the week in negative territory, it has reclaimed all of those losses to sit at approximately 16.25 cpg, with the bulk of those gains arriving in the immediate aftermath of Washington’s announcement.

(EIA via Sparta)

There is a legitimate fundamental underpinning to a stronger HOGO, diesel stocks across PADD 1 and PADD 2 remain conspicuously lean, and any prospect of reduced Middle East supply disruption warrants some repricing.

The difficulty, as with so much in this market at present, is that the ceasefire’s durability looks questionable at best.

(Rotterdam: Diesel)

The arbitrage landscape for European diesel resupply has, if anything, deteriorated further. The combination of elevated USGC diesel differentials and punishing TC14 freight rates has been sufficient to close every US-loading diesel arbitrage into Europe. The sole meaningful supply route currently open into the continent is from East Coast Canada and possibly USAC; a thin thread on which to hang European energy security.

(EIA via Sparta)

(EIA via Sparta)

With West Coast India ULSD cargoes continuing to stream eastward on LR2 tankers, something in this equation must eventually give.

The most logical release valve is a renewed weakening of the HOGO, which would in turn reopen the economics of moving USGC barrels across the Atlantic. Europe needs American diesel, and PADD 3 stocks and refinery yields are sufficiently healthy to supply it.

The price simply needs to make the case; and in the current environment, it likely will not take long.