Oil: Middle distillate tightness persists – ING

Oil prices firmed yesterday despite a recovery in the USD amid waning concern that President Trump may remove Federal Reserve Chairman Jerome Powell from his position. Some fairly supportive US macro data also supported the Oil. US retail sales came in stronger than expected, while initial jobless claims were lower than expected, ING’s commodity analysts Warren Patterson and Ewa Manthey note.

Near-term Oil fundamentals seem supportive

"Near-term Oil fundamentals remain supportive, with the market set to remain fairly tight through this quarter, before becoming better supplied from the last three months of the year. In addition, drone attacks on Oil fields in Kurdistan provided some further support, with producers suspending operations, resulting in around 200k b/d of lost production. However, a deal between the government in Baghdad and the Kurdistan regional government should resume Oil exports from Kurdistan, after being halted since early 2023. The Kurdish region will supply Iraq’s State Organization for Marketing of Oil (SOMO) with at least 230k b/d."

"The middle distillates market continues to signal tightness, with the ICE gasOil crack trading above US$26/bbl now. Meanwhile, Insights Global data shows that gasOil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region fell by 86kt week on week to 1.76mt. This is the lowest level since January 2024. The strength in the European middle distillate market is pulling in diesel from further afield, with reports of some shipments from East Asia to Europe. The strength in middle distillate cracks is providing a boost to refinery margins, which should see refiners increase run rates, helping to ease the tightness. In addition, OPEC+ supply increases will increase the availability of medium sour crude."