Distillate, Oil Market Commentary

Cracks and spreads exhibit gains with continuing low stocks in Singapore, ARA and NY pricing centres 

Diesel; Singapore. (Sparta Global ARBs – Pricing Centre)

WCI arbs have currently reestablished themselves as the most cost-effective arbitrage into Singapore.

This resurgence stems from two factors: firstly, the decline in WCI FOB premia, plummeting from $4.85 /bbl in early October to a current rate of under $1.8 /bbl versus MOPAG 10ppm.  

Ulsan to Singapore MR freight rates. (Source: EIA)

Secondly, the escalation in relevant freight rates for MR and LR vessels departing from South Korea, nearly reaching their highest levels since mid-October at $3.01 /bbl for an MR vessel. 

Despite a recent widening in the GO E/W, barrels from the AG and WCI regions continue to point East.

Aiding this, Singapore’s middle distillate stocks have dwindled to a five-month low, causing diesel premiums to surge to their highest level since late October and currently standing at $0.9 /bbl versus MOPS 10ppm. 

February’s ICE GO, HO and Singapore diesel cracks. (Sparta Live Curves)

Moreover, the trajectory of Singapore’s cracks and spreads for February has demonstrated a notable uptick over the past fortnight, cracks having elevated from +$19.80 to +$22/bbl currently.  

February’s Singapore Regrade and NWE Jet CIF Diff. (Sparta Live Curves)

This is mirrored in the strength observed in gasoil through the movement of Singapore’s regrade; February’s regrade has weakened from +$0.20 to -$0.55 /bbl over the same period. 

The prevailing narrative suggests a persistent tightness in gasoil across the Asia Pacific region which is likely to persist through the first and second quarters, especially with continuingly low Chinese gasoil exports.

Consequently, the trajectory points towards a continuation of the upward movement in Singapore’s spreads and cracks well into Q1 and Q2. 

Diesel; Rotterdam. (Sparta Global ARBs – Pricing Centre

February’s HOGO swap and USGC 10 diff. (Sparta Live Curves)

In a similar fashion to Singapore, ICE GO cracks and spreads have seen a pronounced upward trajectory in recent weeks.

However, despite this the normal arb routes into Europe remain closed at present; EoS arbs (largely directed towards the East) and transatlantic arbs (largely due to widening of the HOGO and narrowing of the USGC 10 diff). 

OECD Europe gasoil demand. (JODI data via Sparta Commodities) 

The closure of these arbs is unusual considering three significant factors of: firstly, ARA gasoil stocks currently sit at their lowest levels in the past five years.

Secondly, an anticipated uptick in spring turnaround activities is on the horizon for the first and second quarters within the EU.

Thirdly, the typical annual increase in European gasoil demand, expected to pick up momentum as February unfolds, further adds to this unexpected scenario. 

Consequently, the prevailing outlook suggests a continued ascent in ICE GO spreads and cracks through the remainder of the first quarter. 

Americas. (Sparta Global ARBs – ARBs Comparison)

The above-mentioned narrowing of the USGC diesel diff, coupled with the widening of the HOGO and a decrease in WCI premiums means that the USGC is challenged currently into parts of Latin America by Asian origin barrels. 

US PADD1 diesel stocks. (EIA data via Sparta Commodities) 

The previously mentioned shifts in USGC diesel diffs and HOGOs are to be expected when the position of PADD1 diesel stocks is observed.

For similar reasons, HO cracks and spreads, similarly to the patterns observed in Singapore and ICE GO, have displayed gains over the past few weeks.  

On top of this, the recent Pricing Managers Index for the U.S. in December, which whilst still contracting, signalled the first signs of economic improvement and a potential increase in diesel demand into the first quarter of 2024. 

Amidst these shifts, significant refinery turnarounds loom in the U.S., notably involving PBF Energy Louisiana and Motiva Port Arthur, with planned CDU shutdowns scheduled for January and February.  

Diesel; New York. (Sparta Global ARBs – Pricing Centre

Presently, all arb opportunities into New York, apart from EC Canada, seem on paper to be closed, necessitating reliance on cracks, spreads, and sales prices to activate these opportunities. 


James Noel-Beswick is Commodity Owner for Sparta. Before joining Sparta, James worked as an analyst for likes of BP and Shell, and leads our continued development of the distillate product vertical.

Sparta is a live, market intelligence and forecasting platform that enables oil traders, refiners, banks, hedge funds and wholesalers to have access to real-time and global actionable insights to capture market opportunities before others.

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James Noel-Beswick is Commodity Owner for Sparta. Before joining Sparta, James worked as an analyst for likes of BP and Shell, and leads our continued development of the distillate product vertical.

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