Products: ULSD Premiums Jump as Vaccination Rates Accelerate

European ultra-low-sulfur diesel (ULSD) premiums jumped as accelerating Covid-19 vaccination rates across the region suggested much better demand days ahead. Even airline jet fuel buying is set to restart this summer after the EU finalized plans for a Digital Green Certificate and began talks with the US over a travel corridor for vaccinated travelers. Jet fuel demand has been by far the hardest hit by Covid-19 with a snowball effect in ULSD markets after refiners retooled their kit to make more road fuel, and traders funnel unwanted jet fuel into diesel blending. Experts suggest the EU is running six to eight weeks behind the US and UK in its vaccination program, meaning regional flights at least could restart in July. Road fuel demand has been much more robust throughout the pandemic but could surge around the same time as Europe’s biggest markets approach the magic 50% vaccination rate and open up their economies. Rates are currently 30% in the EU versus already over 50% in the UK where Covid-19 travel restrictions are in the process of being lifted. ULSD cargoes were pegged at a $8.50 per metric ton premium over front-month ICE low-sulfur gasoil in Northwest Europe at the Apr. 27 close, up from just $3/ton last week and their highest since last summer. Mediterranean cargo values were also up from a $5/ton premium to $10/ton over the screen. Falling diesel tanks have also lifted values with closely watched gasoil stocks in Amsterdam-Rotterdam-Antwerp now at their lowest in 12 months at just above 2 million tons, according to Insights Global. All eyes are now on Russia’s May ULSD loading program for Primorsk due in the next day or so. US barrels are still out of the picture aside from system transfers with fuel still more likely to move in the opposite direction as US fuel buying races ahead of Europe’s. But there is a threat hanging over the market in the form of at least 1 million tons of East of Suez ULSD sitting offshore West Africa. The fuel is being amassed by Swiss traders Trafigura and Glencore and China’s Unipec on newly built very large crude carriers in readiness for the post-Covid-19 rebound in road fuel demand. The location gives them the option of sailing either trans-Atlantic or to Europe, or being sold into Africa, wherever buying appears. Product Prices $/ton, c.i.f. basis Apr 27 '21 Apr 20 '21 Chg. ICE LS Futures (front month) 525.50 519.00 6.50 ICE LS Futures (second month) 527.50 521.50 6.00 0.1% Gasoil NWE* 532.25 526.50 5.75 0.1% Gasoil Med* 527.50 520.00 7.50 10 ppm Diesel NWE* 533.50 526.75 6.75 10 ppm Diesel Med* 534.25 528.50 5.75 HSFO NWE* 359.00 362.00 -3.00