Diesel Squeeze in Europe Is Set to Deepen, Morgan Stanley Says

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Or sign-in if you have an account.(Bloomberg) — A diesel squeeze is playing out across Europe as a slew of major supply challenges coincide, according to Morgan Stanley, which flagged record refining margins in the region and slumping stockpiles.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“The picture is genuinely tight,” analysts including Martijn Rats said in a July 19 note. “Our supply/demand modeling points toward European diesel inventories falling to multi-year lows toward year-end,” they added.Global energy markets have been jolted this month by the fresh flare-up in the US-Iran war, although petroleum product prices have rallied harder than underlying crude oil. The market for diesel — a workhorse fuel that powers trucks, agriculture and industry — has been tightening on a host of factors including the disruptions in the Strait of Hormuz, but also Ukrainian attacks against Russian refineries, and a diesel-export ban imposed by Moscow.“The real bottleneck in the oil system right now is refining, more so than crude,” the analysts said, pointing to some unsold African oil cargoes, as well as bearish contango pricing in some parts of the market. “The epicenter of all this is the diesel market, and Europe in particular.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againDiesel-refining margins in Northwest Europe — known as crack spreads — have surged to a record, they said. Local stockpiles are expected to draw steadily from August, reaching a low of about 299 million barrels in November – the smallest for the time of year since at least 2015, they added.Further afield, industry conditions in China were also contributing to the tightness as refiners processed less crude. “China never supplies Europe with diesel directly,” the analysts said, but when “China runs less, there’s simply less product in the global system to spill westward.”Still, Morgan Stanley cautioned that the tightness was already reflected in prices, advising investors against betting on more gains from current levels. The market is “full priced — don’t chase,” they said.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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