ICE Brent crude settled more than 1% higher on Tuesday, inching toward the $65/bbl mark as traders shifted their attention toward mounting supply risks rather than the prospect of a market surplus, according to ING commodity strategists Ewa Manthey and Warren Patterson.
Gasoil crack surges on Russian diesel concerns
Fears surrounding Russian diesel supply continue to send ripples through the middle distillate market. The ICE gasoil crack rallied sharply, climbing above $38/bbl compared with roughly $23/bbl in mid-October.
At the same time, the prompt ICE gasoil timespread jumped into a steep backwardation of more than $43/t. Market strength is being driven by ongoing sanctions and Ukrainian attacks on Russian refineries, which have raised fresh doubts about the availability of Russian diesel exports.
Refinery margins support higher runs
Robust middle-distillate margins are expected to push refiners to maximise output of middle-of-the-barrel products. More broadly, strong refining margins should encourage higher refinery runs, reducing the likelihood of a bearish shift in crude Oil fundamentals.
ICE Futures Europe confirmed that, starting January, deliveries of diesel under the ICE gasoil contract will be prohibited if the fuel is produced from Russian Oil in third countries. The change aligns the contract with the EU’s upcoming ban on refined products derived from Russian crude.
API data shows rising us inventories
Fresh data from the American Petroleum Institute indicates that US crude Oil inventories rose by 4.4m barrels last week. Refined product stocks also increased, with gasoline up 1.5m barrels and distillate inventories higher by 600k barrels. While the figures lean bearish, market participants are now focused on the official US Energy Information Administration (EIA) inventory report due later today.
