Europe distillate weekly round up: Jet shows more signs of recovery, diesel diffs rebound

Quantum Commodity Intelligence - Refining margins for jet cargoes into northwest Europe and ULSD barges in ARA gained for the fourth successive week on Friday, with jet gaining $0.36/b on the week to $5.54/b and diesel up $0.15/b to $6.47/b.

Flat prices rose $4/mt for jet cargoes and $2.75/mt for diesel barges, including $39.75/mt and $37.75/mt gains between Monday and Friday amid the crude tumble and subsequent rally.

Jet is recovering in Europe as the aviation market improves. 

A jet cargo into La Havre traded at a year-to-date high differential of $29/mt above front-month Low Sulfur Gasoil futures Friday.

The number of flights in 41 countries in and around Europe continued to rise and close the gap on 2019 levels.

Demand for flying has reached around 67% of levels seen two years ago this week, nudging up from 65% last week.

But jet stocks in ARA remained huge.

Although jet stocks in ARA fell around 60,000 mt over the week to 1.14 million mt, they were still around 350,000 mt higher than a year earlier.

The closure of the Rhine after devastating flooding last week should have impacted the middle distillate market more this week, but distillate barge trade has been thin for several weeks after the previous two very low volume expiries for Low Sulfur Gasoil futures contracts.

The busiest day of trade in the afternoon trading window for ultra-low sulfur diesel barges in ARA on Wednesday saw just three lots change hands.

Differentials for barges below August Low Sulfur Gasoil futures nonetheless crept higher through the week, rising from trades as low as -$2.50/mt below the August differential to -$0.75/mt on Thursday as the Rhine re-opened, followed by -$1.25/mt to -$1/mt Friday.

Diesel and gasoil stocks in ARA were expected by analysts to rise this week because of the closure of the Rhine, which only fully re-opened Friday, but inventories slipped lower instead.

But August cracks for calendar Low Sulfur Gasoil futures, combining both August and September futures, were little changed through the week, largely hovering either side of $7/b throughout the week, but never close to regaining the heights above $8/b seen early last week.

Diesel and gasoil stocks in ARA dipped lower in the week to Thursday but were still up 850,000 mt from a year earlier.