Asia’s mid-distillates rebound as uncertainty over Iran peace agreement resurfaces and spot trading remains sluggish

⑴ On Tuesday, the Asian diesel and jet fuel markets rebounded as the prospects for a potential peace agreement between the US and Iran once again became uncertain. Overall trading in the physical window was muted, while refinery crack spreads recovered to above $48 per barrel, reversing the weakness observed in the previous session. ⑵ The prompt market structure for both diesel and jet fuel shifted to a deeper prompt premium structure. The discount of jet fuel versus diesel widened, closing at $2.05 per barrel. No diesel or jet fuel trades were concluded in the Singapore spot market that day. ⑶ Brent crude oil rose 3% on Tuesday, as US military strikes against Iran increased uncertainty over the immediate possibility of a ceasefire agreement and the reopening of the Strait of Hormuz shipping lanes. ⑷ The middle distillates market is currently caught between renewed geopolitical risk premiums and weak fundamentals. On one hand, reduced expectations for a peace agreement supported higher oil prices and crack spreads; on the other hand, Indian government data showed that refinery crude throughput in April fell by 8.9% month-on-month to 5.23 million barrels per day, indicating regional demand may be weakening. ⑸ The light trading in the physical market reflects a wait-and-see attitude among end-users. Market participants are reluctant to take on significant positions while negotiations remain uncertain, and the future direction will largely depend on the next developments in the US-Iran situation and on when actual energy flows will return to normal.