BAKU, Azerbaijan, November 18. Diesel prices remain under pressure across the world and diverge from other key fuels due to dwindling stockpiles in the US and incoming EU fuel ban which will to the largest extent affect global distillate market given Russia’s role as a key supplier of this fuel to Europe and worldwide, Trend reports with reference to Fitch Solutions.
“Global diesel prices remain elevated with widening spread between ICE gasoil and Brent. Pressures in the market have been building for the past two years. Crack spreads between diesel and crude has been historically high given the worldwide shortage of refined fuels seen in the pandemic recovery. Refining costs have also risen, due to higher energy input prices (including the soaring cost of natural gas and hydrogen) and a rise in the cost of carbon emissions allowances. In addition, the US faces record low diesel stockpiles,” reads the latest report of Fitch Solutions.
The report reveals that in order to replenish its depleted inventories, the US may look to curb exports of diesel to Europe but this is unlikely given the mid-term election results which see a split legislature.
“Lower exports from the US and looming EU fuel import ban on Russia, leaves Europe with the outlook of very tight distillate market next year, supporting diesel price rally. At the same time, gasoline price benchmarks continue to settle above historical averages however have seen some loosening over the past few months, following crude prices trajectory and seeing relatively healthy refining capacity globally. The seasonal weakening in demand for gasoline starting in October in the key demand centers, including the United States and Europe, has also been a bearish factor. But concerns for wider global economic slowdown could see demand for diesel materially decrease easing supply constraints and prices,” analysts from Fitch Solutions say.
Supply tightness is expected to be somewhat outbalanced by the weakening demand as key consumers of fuel now expected to see slowing economic growth or an outright recession in 2023, reads the report.