Diesel sails West

Coordinated SPR releases continue to be the hot topic for crude markets, with China expected to release light sweet crude stocks, in line with the destocking that occurred over the year. Now, China can easily score points with Washington by following the US guidelines. It is likely that China continues to release ESPO-type crude, about an additional 7 mb in 2021 according to trading sources.

Diesel export to the US is strengthening, with Russian ships sailing to the East coast with about 2-3 mb of additional supply. Russian diesel exports from Baltic ports has strengthened in November, beating expectations. Yet, Russian diesel usually sails to Europe. The sustained high HOGO spread (US diesel against European diesel), at 18 c$/gal, is boosting exports to the East coast, unlike the transatlantic arb for gasoline, closed as US buyers are expecting the US refiners to ramp up output shortly.

In Europe, ARA refined product stocks built by 1.5 mb, with diesel stocks ramping up by 0.2 mb. Only jet fuel stocks have been drawing continuously, reflecting the stronger pull from the aviation sector.

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