Strong gasoil/diesel values continue to dominate the headlines

Naphtha:

• Narrowing E/W spread will be short lived once prompt tightness in NWE eases toward H2 July
• In the meantime, Med barrels will temporarily remain in the West to alleviate tightening conditions in ARA
• Asia’s naphtha cracks will recover towards late-July once cracker outages end, new units lift operating rates, rewidening E/W premium and encouraging Med, US swing barrels East once more

Gasoline:

• Neutral West of Suez cracks: Yesterday’s EIA data release brought only limited relief to gasoline markets with nationwide US stocks down w/w, but PADD-1 still building. Recent news of Dangote upping gasoline production will further erode sentiment in the Atlantic Basin despite a very solid European gasoline demand outlook, with cracks falling short of seasonal expectations.
• Bearish East of Suez cracks: Chinese exports are rising whereas import demand is leaving much to be desired for the likes of Indonesia and Japan. Lengthening balances across Asia will likely keep the market pressured for the remainder of the month.

Middle Distillates:

• Bullish WoS gasoil: WoS cracks surge as tight PADD 1 & 3 stocks, low Rhine water levels, and stronger Brazilian demand squeeze supply.
• Bullish EoS gasoil: Asian gasoil market rallies on scarce arrivals and subdued Chinese exports.
• WoS jet/kero has some upside: Aviation fuel demand set to lift as Europe’s summer travel gains momentum.

Residue:

• Neutral global HSFO cracks: Singapore HSFO cracks have likely reached a short-term bottom after a steep correction, while extremely low inventories in the US and ARA will help to limit further downside West of Suez.
• Neutral global VLSFO cracks: Singapore VLSFO cracks remain broadly aligned with East of Suez regional bunker differentials and will hold steady in the near term. In the West of Suez, VLSFO cracks have been supported by higher blending costs and are likely to stabilize in the coming weeks.

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Kpler delivers unbiased, expert-driven intelligence that helps you stay ahead of supply, demand, and market shifts. The full report is available within Insight and contains:

• Market & Trading Calls
• Naphtha: E/W narrows as prompt tightness in Europe meets rising Middle Eastern output
• Gasoline: US and NWE cracks up, Med and Asian values fall behind
• Middle Distillates: Diesel’s got its groove back
• Residue: Singapore HSFO cracks near bottom while West Suez VLSFO holds firm

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