Insights / News vs. Numbers
Higher diesel flows, weakening cracks - what next? Is the sell off over done?
By Mukesh Sahdev Visit author profile
Diesel markets are undergoing a sharp correction as geopolitical risk premiums unwind, global exports rise and refining margins retreat to 60-day lows. Yet the physical market tells a more complicated story. Winter backwardation remains significant, Singapore inventories have fallen to a nine-week low, and renewed attacks on Russian refineries threaten supply reliability. Higher US refinery yields and Asian exports offer near-term relief, but may not eliminate the underlying vulnerability. Has diesel been oversold, or is the market finally adjusting to improving fundamentals? XA sees a potential buying opportunity in the correction, with Chinese export flows, Russian refinery outages and the approaching US spring supply dip determining the next move.
What this insight covers
Cracks and price structure: Why diesel cracks across ICE, NYMEX and Singapore have fallen to 60-day lows, and what weakening time spreads reveal.
Global diesel flows: Record middle-distillate exports, the contribution from India, Saudi Arabia, Singapore and Russia, and whether the surge is sustainable.
Russian supply risks: Five reportedly targeted refineries representing 1.3 mb/d of capacity and the implications for diesel availability.
US refinery response: Higher distillate yields, competition with jet fuel and the emerging January–April supply vulnerability.
Asian market divergence: Singapore inventory draws versus expectations of higher Chinese exports and easing freight costs.
Market outlook: Whether the correction is overdone, what could trigger a rebound and the indicators that would invalidate a bullish call.
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