Opec, DOE and diesel.

Yesterday's DOE release gave 2 new insights. 1) Crude stocks are no longer building at the pace seen over the past weeks, though stock levels are still very high compared to past few years. 2) The overhang is spreading to combined products, most notably middle distillates. Given that we are now seeing a good trend of Stock draw in crude, SFOT suspects that refining margins will start to drop off in the coing months. Demand will probably now hit distillates(diesel/jet/heating oil) more than the residuals and Crude. Opec meets this weekend and IEA+ OPEC's own supply/demand study is due tomorrow, it should make for an interesting lead up into the weekend.
Relative value wise, it is now clear that Gasoline dynamics are the least worst off compared to any part of the barrel, while dd/ss in distillates remains very bearish. Reported stocks in Europe and US are extremely high in that part of the barrel, and is not likely to recover anytime soon. SFOT is even more convinced of being long gasoline crack vs distillate crack on any weakness, and have added one more unit of this trade post data yesterday. Within middle distillates though, SFOT finds a little peculiarity with the behaviour of Diesel. Diesel inventories have been building up a lot in the US, which is probably normal this time of the year, barring last year when China was importing tonnes and the world was short diesel. Demand this year has been extremely poor in diesel, and the combination should see diesel weaken a lot. However, comparing Diesel and Jet, it is Jet that has suffered the most in that part of the barrel and they are trading almost flat to each other now in spot price. SFOT shall endeavour to dig more into this relationship.

In the mean time, Well done to english teams, and congratulations arsenal for finally having a small bit of luck they have gone without for a long time. SFOT hopes for a good draw for the 1/4 finals.... Porto perhaps?

SFOT has the luxury of being off tomorrow and will be back in action on Monday. Good luck.