Diesel cracks stay high but seaborne supply points to easing

Diesel cracking prices remain elevated in Northwest Europe, hovering around $88 per barrel, while jet and kerosene prices sit near $85 per barrel as of November 6 (Argus). The strength of these prices is attributed to tight inventories in the Atlantic Basin; however, seaborne shipments suggest a potential easing in supply.

Russia is the most significant factor that could alter this trend. Attacks on Russian refineries have reduced output and led to export restrictions, causing diesel exports from its Baltic and Black Sea ports to drop to an eight-month low of 150,000 barrels in August, down from 755,000 barrels in August 2025. However, exports have started to recover since mid-October, surpassing 350,000 barrels by November 6 (28-day moving average).

Refinery attacks have reached their lowest levels in six months in October, raising the possibility that production could return to pre-pandemic levels, nearly tripling current volumes. Nonetheless, this would depend on the intensity of any further attacks and the speed of repairs.

Global seaborne middle distillate exports, excluding Russia, reached a record high of 10.2 million barrels per day as of November 6 (28-day moving average), 20% higher than the seasonal average from 2016-25. Saudi Arabia's exports have surged by more than 500,000 barrels month-over-month, with nearly 300,000 barrels coming from Red Sea ports and the rest from Hormuz ports.

India's exports are also at seasonal highs, up 130,000 barrels from a month earlier, while US Gulf Coast exports have eased slightly but remain at seasonal records.

The global increase in diesel, gas oil, and jet/kero exports is particularly noteworthy given the collapse in Northeast Asian exports in October, down by 25% between October 1 and 31 (28-day moving average), with China accounting for around 70% of the decline following a brief suspension of exports for the Golden Week.

Refinery capacity is recovering globally in November and December as the maintenance season ends, with some turnarounds pushed back to 2027. Refineries such as Saint John, Negishi (150,000 barrels), Fawley (270,000 barrels), and Cartagena (110,000 CDU) are expected to resume operations, with China's potential fourth batch of export quotas adding an additional 600,000 barrels of transport fuel exports across November and December.

However, China's domestic diesel supply remains tight, and the country is likely to prioritize jet/kero exports.

While margins may soften over the coming months due to the building supply from multiple fronts, low Atlantic inventories and winter heating demand should cushion any decline. However, a significant drop in oil exports transiting the Strait of Hormuz could cut middle distillate exports from the Gulf and affect crude supply worldwide, posing a key risk to the current upward trend.