Heating Oil

Some of the Strength in oil can be attributed to strength in HO/Diesel/gasoil.Talk of US exports to latin america heating up and also a few refinery glitches In the USA causing some short-term supply issues.The HO crack spread for june is up $5 since April 6th,Jun/July Calendar spread tighter by 150 ticks as well.This is a situation where  we can see the tightest in the market evident by the Spread movement.We may not know why  but it doesn’t matter there is a tightness in the market that wasn’t there a month ago.

In Europe gasoil Calendar spreads are tighter as well,M/N  has tightened up by $4 since early April, as the contango is  shrunk between the two months.Bloomberg tells us that Cross Atlantic Cargo flows are increasing to take advantage of the tightest in gasoil spreads.

What I find confusing is that a few weeks ago Every Expert was saying we have no room to put the  excess gasoil/Diesel ,We have so much supply we are drowning in it.But yet Crack spreads tighter,calendar spreads tighter and obviously demand stronger.

That is the take away,regardless of reason  is that  Diesel is in demand and it  has  been a leg for Brent oil to stand on.

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