Distillate summary: Diesel gives back gains as strikes near end
Quantum Commodity Intelligence - Diesel cracks ended the week lower as support drained from French industrial action, with just a single refinery shut due to strikes by Friday.
Refining margins on ULSD barges gave back over $12/b from seven-month highs at the start of the week to $67.98/b at Friday's cash close.
ULSD cargoes slipped nearly $7/b over the same period to $68.75/b above ICE Brent.
Futures have also softened sharply, ICE November gasoil closing the week less than $50/b above Brent for the first time this month.
The end of a seven-day strike at TotalEnergies' 231,000 bpd Donges refinery on Wednesday was the catalyst, as it signalled the beginning of the end for unions that have crippled France's oil sector for almost a month.
Strikes are set to continue until at least 27 October at Total's 240,000 bpd Gonfreville refinery and its depot at Feyzin, but it means just two Total sites remain on strike from five at the start of the week.
Over 600,000 bpd – or half of French output – was offline at the height of the industrial action, that also included two of ExxonMobil's French refineries.
French fuel stations reporting shortages are down from nearly 30% at the start of this week to 16.9% by Thursday, government data showed.
Support for diesel was further drained this week by a surprise stockbuild in the US.
US distillate inventories nudged higher in the week to 14 October by 0.12 million barrels to 106.19 million barrels, according to EIA data.
Stocks remain near historic seasonal lows, however, with distillates on both sides of the Atlantic around 30% below their pre-Covid average between 2015-2019.
Tight global supply will provide a significant floor for diesel cracks, especially as we move closer to the EU ban on Russian oil products at the start of next year.
Russian volumes accounted for around 37% of Europe's diesel imports last month, according to the latest analyst estimates, down from around 60% in the middle of the summer.
Middle East suppliers are so far filling that gap, sending around 1.2 million bpd of diesel to Europe in September, the same as from Russia.
European values will need to stay high to attract additional supplies from the Middle East, as well as US and Asia
East-west spreads are already extremely wide.
The gasoil EFS – which measures the premium between Singapore 10ppm gasoil swaps and ICE gasoil futures in Europe – hit a seven-month low $125.47/b on 18 October and should be enough to pull cargoes from east of Suez.
The spread has narrowed since European values sold off this week, to -$104.26/b by Friday's Asia close.
Jet
Losses were most severe on jet, owing to relatively subdued demand because of the fall in seasonal travel.
Jet cargo cracks fell $13 on the week to $38.62/b by Friday's close.
Stocks have also been rebuilding for some time.
Jet fuel inventories in the ARA region have climbed for three straight weeks, up around 12% from the end of September to a six-month high 872,000 mt as of 20 October.
