European distillate prices outpace Brent amid US draw, Asia shortage

London (Quantum Commodity Intelligence) – Refining margins for distillate products in Europe continued their march higher Wednesday and outpaced a rising crude oil price amid a greater-than-predicted US stock draw, expectations of economic recovery and supply shortages in Asia, according to Quantum data.

Gains were weighted towards the front end of the curve across products, with the month-ahead CIF Northwest Europe ultra-low sulfur diesel crack up $0.84/b since Friday and $0.41/b on the day at $7.66/b around the 16.30 London close.

Jet fuel CIF NWE was up a similar amount with the month-ahead crack making $0.36/b and $0.79/b gains on the day and since Friday, respectively, to $5.8/b at the Wednesday close.

Positive cracks for refined products are expected to rise when feedstock crude prices increase even if the strength of products markets is unchanged, simply to maintain profit margins in percentage terms.

Quantum data shows the margin for European diesel and jet benchmarks in percentage terms gaining between 0.4% to 0.5% on the day for each of the next three months though, meaning that their moves are more likely to be rooted in fundamentals.

A fresh EIA inventory report in the afternoon showed distillate stocks down 1.7 million barrels against expectations of only a 1 million barrel draw.

Mobility data, including air passenger and road and air freight, also continues to improve across northern Europe and the US, while European countries are also preparing to relax border controls for their summer holiday season.