Transportation Fuels First Look - Diesel in the doldrums as weak demand prompts refiner run cuts
May 14, 2024
Retail regular gasoline prices fell by 2.4c in the last four weeks to $3.608/Gal. About 56% of the change was due to the price of crude oil, while the remainder was the refinery margin
Scroll down for a chart of the RBOB-WTI crack spread, a measure of refinery margin. It shows elevated cracks this year
Total motor gasoline inventories rose by 0.9 MMBbl for the week ending May 5 and are 2% below the five-year average for this time of year
US gasoline demand remains subdued, margin recovery expected in summer (Bloomberg)
US gasoline demand continues to underperform, with the four-week average of product supplied barely increasing and staying at a decade-low for the season, excluding the anomaly of 2020
High retail prices have been the main driver behind the sluggish US consumption, contributing significantly to the lower-than-anticipated global oil demand last month, said JPMorgan in a note to clients
Despite current weak refinery margins for gasoline, the weakness is anticipated to be temporary, with strong summer demand expected to support prices
Retail diesel prices fell by 19.9c to $3.848/Gal in the last four weeks. About 47% of the change was due to the price of crude oil, while the remainder was the refinery margin
Scroll down for a chart of the NY Harbor ULSD-WTI crack spread, a measure of refinery margin. It shows elevated cracks this year
Distillate fuel inventories increased by 0.6 MMBbl for the week ending May 5 and are about 7% below the five-year average for this time of year
Diesel in the doldrums as weak demand prompts refiner run cuts (Bloomberg)
Diesel refining margins have plummeted, with Asian refining margins falling from nearly $29/Bbl in early February to around $15, reflecting an oversupply that has outpaced demand, leading to reduced refinery run rates and a shift towards gasoline and jet fuel production
Influences include a warmer-than-expected winter in the Northern Hemisphere, keeping stockpiles high, tepid industrial demand, and the rise of LNG-powered trucks in China
Refiner Phillips 66 sees run cuts in Europe and Asia but expects increased gasoline demand over the summer and improving jet fuel consumption
Despite a recent modest recovery in margins, the long-term outlook for diesel remains pressured by increased diesel-producing capacity and higher distillate yields in Europe and Asia, compounded by shifting fuel preferences in China and softening global demand.
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