Diesel gathers momentum as other fuels bear brunt of coronavirus impact
Diesel profit margins are bucking the downward spiral engulfing jet fuel and gasoline, lifted by continuing industrial activity and stockpiling even as national lockdowns hammer demand for other fuels.
With 3 billion people - nearly 40% of the world’s population - under lockdown and entire airline fleets being grounded, demand for transport and aviation fuels is plummeting.
But in addition to being a transport fuel, diesel, and other middle distillates like gasoil, have industrial and domestic uses, and demand there has not been hit as hard.
However, diesel refining margins in Europe hit a five-month high on Monday at nearly $17.50 a barrel while gasoline in the region is being produced at a loss and jet fuel differentials are trading at record lows, deep into negative territory.
Refining margins for the benchmark 10ppm gasoil grade in Singapore have climbed about 45% in the past two weeks.
Asian jet fuel margins, meanwhile, are lingering at their lowest March levels for 12 years, Refinitiv Eikon data showed.
“Gasoil has been the one bright spot for refiners as it remains supported by industrial demand and consumer stockpiling as prices fall,” shipbroker Gibson said in a note.
But it warned that margins will come under pressure as stockpiling demand wanes and warmer weather reduces demand for domestic heating.
Gasoil demand up the Rhine river was high because of the contango price situation, while inland importers in Germany and Switzerland were building stocks to benefit from low prices, said Insights Global’s Lars van Wageningen. [ARA/]
“Asian diesel cracks have held up well despite severe weakness in jet and gasoline cracks in recent weeks,” consultancy Energy Aspects said.
“But as Middle Eastern refineries are only now returning from turnarounds, we expect a sharp correction in Asian distillate markets soon to bring them into line with the fundamentals of other clean products,” it added.
Editing by David Goodman
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