Gains in European jet fuel and diesel prices caused by the Israel-Iran conflict have entirely reversed following this week's ceasefire agreement.
Front-month Ice gasoil futures — the underlying value inArgus' European middle distillate assessments — sank to $688.25/t at close on Tuesday, 24 June, the day of the ceasefire. This was the contract's lowest settlement since 12 June, the last close before the conflict began. The contract fell by $75/t on the day on Tuesday, the largest single-day decline in 31 months.
Benchmark crude basket North Sea Dated dropped by around 11pc to $68.06/bl on Tuesday, its lowest closing value since 11 June.
Ice gasoil values rose to $798.50/t on 19 June, as the conflict raised fears of weaker supply from the Mideast Gulf, particularly for middle distillates. The region accounted for just under 25pc of Europe's jet fuel and diesel imports last year, according to Kpler and Vortexa. Tensions rose just as seasonal demand for jet fuel and diesel neared an annual peak in Europe, with the region relying on imports to meet demand.
Market participants said the price rises were excessive, considering there had been no disruption to supply.
European refining margins have also fallen, reflecting middle distillate prices' heavier falls than those for crude. Delivered cargoes of jet fuel and diesel to northwest Europe held premiums of $21.08/bl and $22.90/bl respectively to Dated, having peaked at $26.82/bl and $28.98/bl on 19 June.
Cracks have averaged below $20/bl in recent months. Jet fuel margins could remain elevated in line with seasonal demand, but European diesel supply had tightened before the conflict because of weaker imports and extra demand for marine gasoil (MGO) in the Mediterranean after the start of the emissions control area.
This shortness of supply has not yet fully resolved and could further support refining margins in the coming weeks.
