Global distillate margins showed remarkable strength this summer, with levels unseen since Feb 2024. Meanwhile, gasoline margins had to wait until August.
The strength in middle distillates likely propped up prompt crude prices despite growing supplies from OPEC and the Atlantic Basin amid lackluster economic numbers from China, which is depending on a boost in higher product export quotas to process stronger crude intake.
Taking a look at our top import port indicators chart, we can see that in May, diesel demand began to rise for three consecutive months, reaching 7% above the seasonal range in August y-o-y above the top of the nine-year range.
The set of factors that underpins this rise in import requirements could be seen again when/if the Wider Arabian Sea middle distillate arb toward Europe closes in the future again similar to July 2025. A swing toward the Pacific for an extended period of time amid falling ARA middle distillate inventories and a demand surge (power gen demand, diesel used for bunkers due to ECA) while supplies fluctuate (low natural gas supplies /refinery rationalisation) will likely support European margins.
And if we look at the top seaborne gasoline import port indicators, we can see the opposite trend to middle distillates, when comparing January-August(red line) against the last two previous years, we see volumes reveal another disappointing year on average (-0.5% vs 2023, -3% vs 2024). Despite lower prices at the pump in the US, demand for gasoline has been lacklustre amid overall growing supplies in the Atlantic Basin (Dangote (650kbd) and Dos Bocas (340 kbd but running between 180-190kbd)).
LHS: Top middle distillate import ports (bd) (diesel 1-100, 101-200 / jet 1-100)
RHS: Top gasoline import ports (bd) (gasoline 1-100, 101-150)
Q3 seaborne imports for transportation fuels in 2022 and 2023 rose above Q4 demand (see chart below), but as we look ahead to Q4 2025 and away from a strong Q3 2025 we could see limited global factors of strength in transportation fuels (strength in middle distillates, weakness in gasoline).
Year on year top import port indicators for diesel/gasoil, jet/kero, gasoline/blending components (bd)
Lingering strength in global middle distillate margins will likely be underpinned by a few factors. For Europe, the largest demand center for diesel in the Atlantic Basin, January 2026 brings tightened restrictions on diesel from Turkey and India as the latest EU sanctions enforces refiners/sellers to prove the origin of the crude processed to make refined products, which could mean a 400 kbd loss of middle distillate imports into the the EU + UK countries.
Q4 refinery turnarounds in the Middle East Gulf will also likely provide support for winter cracks. Satorp in Jubail, Saudi Arabia (460kbd) will undergo a 60-day scheduled turnaround during November-December, while Kuwait’s Mina Abdullah refinery (490kbd) will start planned maintenance in October for 30 days (Argus), which will mean fewer barrels available for exports at a time when Europe has become highly dependent on supply from the region. Despite the recent inventory builds in ARA (2% higher y-o-y) (Insights Global), any further domestic supply hiccup could have an outsize impact on cracks.
In the US, PADD 1 distillate inventories remain at the bottom of the five-year range despite building on a weekly basis (EIA) as we head into harvest season amid winter and refinery maintenance (September-November), which will likely draw volumes from PADD 3 via pipeline and limit barrels available for seaborne exports, another factor supporting distillate margins in Europe.
And finally, South America’s harvest is expected to be a relatively large one compared to 2024 based on planting statistics, therefore we could see a seasonal increase in diesel imports in August and September, likely pulling from PADD 3.
Despite the factors propping up the Atlantic Basin middle distillate markets, China’s need to export higher volumes of clean products should cap upside. Clean product export quotas utilisation remained lower y-o-y in H1 2025, which means refiners need to accelerate exports in the coming months to qualify for the final batch of quotas, reported at around 10mt.
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Head of Market Analysis EMEA