European Diesel Margins Hold Firm Despite Surprise Rise in US Inventories

European diesel profit margins held steady near record levels on Wednesday, showing resilience despite a surprise build in U.S. inventories that defied analyst expectations.

US Stockpiles Rise Unexpectedly

Data from the U.S. Energy Information Administration (EIA) showed that distillate stockpiles, which include diesel and heating oil, rose by 800,000 barrels last week. The increase brought total inventories to 104.2 million barrels.

This result ran contrary to analyst forecasts, which had widely predicted a decrease of 1.3 million barrels. The EIA report also noted that distillate inventories on the U.S. East Coast have fallen to an all-time low, highlighting regional tightness in the market.

Market Reaction

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The European market largely shrugged off the bearish U.S. inventory data. The premium for low-sulphur gasoil futures over Brent crude futures, a key indicator of refinery profit margins, stood at $76.39 per barrel as of 16:15 GMT.

This represented a slight increase of 22 cents from the previous day's close, underscoring the fundamental strength supporting diesel prices in the region.

Supply Concerns Linger

Underpinning the market are ongoing supply disruptions. According to two industry sources, Russia's Kirishi refinery (KINEF), one of the country's largest, has halted crude processing operations. The halt reportedly follows a drone attack on August 30 that damaged several processing units at the Surgutneftegas-operated facility.