World diesel costs to depend on refinery closures for assist in 2025

By Ahmad Ghaddar, Shariq Khan and Trixie Yap

LONDON/NEW YORK/SINGAPORE (Reuters) – The worldwide diesel market will possible discover value assist in 2025 from the closure of about 1% of refining capability, merchants and analysts stated, offsetting present weak point and structural downward strain because the world shifts to cleaner fuels.

The market ends 2024 on shaky floor, regardless of peak seasonal demand, as margins on this planet’s key vitality hubs in Singapore, northwest Europe and the U.S. Gulf have come off November’s agency ranges as some refineries returned from upkeep shutdowns.

About 1 million barrels per day of refining capability in Europe and america is anticipated to completely shut down subsequent 12 months in response to weak income, Reuters calculations present, whereas world demand is anticipated to rise barely.

“For 2025, we’re constructive on European diesel costs because of the capability closures, nonetheless low ahead margins that may maintain utilisation ranges comparatively low, and a slight rebound in demand,” Vitality Points analyst Natalia Losada stated.

For now, seasonal demand is providing restricted assist.

Consultancy FGE Vitality expects European diesel and gasoil demand to contract by 230,000 bpd year-on-year over January and December even amid forecasts that the northern hemisphere winter would be the coldest in 10 years, on low highway gas use.

The return from upkeep this month of refineries like Saudi Arabia’s Yasref and Kuwait’s Al Zour will increase provides from the Center East, they added.

Asian diesel cracks recovered to three-month highs for many of November, however have crept decrease in December to common under $15 a barrel.

U.S. ultra-low sulphur diesel futures hit a $26 per barrel premium in opposition to West Texas Intermediate crude oil futures on Nov. 26, the best since July, however the crack has since eased to a close to two-month low of below $22 by Dec. 5. Margins in Europe adopted an analogous trajectory, hitting a 16-week excessive of $18.70 per barrel on Nov. 26, then softening by greater than $2 by Dec. 11.

SUPPORT IN 2025

Distillate fuels like diesel and gasoil have a variety of makes use of together with as a motor gas, for heating and powering factories. However a shift in world automobile and truck fleets to cleaner or renewable fuels, significantly in China, has slashed demand.

Nonetheless, the Worldwide Vitality Company expects gasoil and diesel demand to increase subsequent 12 months by 95,000 bpd – up from a 180,000 bpd contraction this 12 months – and merchants and analysts say there are different components that would assist the market in 2025. The refinery closures embody Scotland’s Grangemouth refinery, LyondellBasell Industries (NYSE:LYB)’ 263,776 bpd Houston refinery and Phillips 66 (NYSE:PSX)’s and 139,000-bpd Los Angeles refinery. Gunvor Group introduced on Dec. 10 plans to stop gas manufacturing at its 75,000 bpd refinery in Rotterdam. JP Morgan expects European diesel margins to commerce at about $17-$19 a barrel subsequent 12 months, rising to $21 in 2026 as refinery shutdowns outpace demand contraction. It expects U.S. margins to stay robust, averaging $25 in 2025 and $28 in 2026. Additionally, delivery guidelines set to come back into impact in Could, making the Mediterranean area an Emission Management Space (ECA), are anticipated to bolster gasoil demand by about 50,000 bpd, merchants say, because the business strikes away from dirtier gas oil. Whereas Asian refiners who usually export to Europe will profit from much less European capability, two merchants stated lighter refinery upkeep shutdowns and new refinery expansions subsequent 12 months are anticipated to maintain Asian costs below strain.

Contemporary additions to refining capability in China, India and Indonesia will possible whole greater than 800,000 bpd subsequent 12 months, Reuters calculations present. FGE forecasts Asia’s diesel cracks to common lower than $14 a barrel for the primary half subsequent 12 months – barely decrease or steady relative to present ranges.