OIL PRODUCTS: Oil Products End of Day Summary: Diesel Cracks Erase Gains
Jul-18 18:18
Diesel cracks have erased their previous rally to plunge in US hours, after the EU revealed its import ban on Russian refined products obtained in third countries will have a transitional period of 6 months
- US gasoline crack down 0.6$/bbl at 23.01$/bbl
- US ULSD crack down 0.4$/bbl at 35.76$/bbl
- The initial support today came after the EU sanctioned India’s Vadinar refinery,
- “After a transitional period of 6 months, it will be prohibited to EU operators to purchase, import, or transfer into the Union petroleum products obtained in a third country from Russian crude oil, as well as to provide related technical or financial assistance.”
- The EU announced its 18th Russia sanctions package July 18, banning imports of refined products made from Russian crude could be bullish for Atlantic diesel cracks, Platts said prior to the 6-month transitional period announcement.
- The Phillips 66 Bayway refinery in NJ is close to being able to run normally, Bloomberg said.
- China’s June gasoline exports fell 16.7% y/y to 780k tons, according to official government data cited by Bloomberg.
- CDU capacity utilisation rates at China’s state-owned refineries fell by 0.26 percentage points on the week to 81.21% as of July 18, OilChem said.
- The refining industry in China is at a “crossroads as demand approaches its peak,” with 840k b/d of capacity at risk of closing before the end of 2028, according to BMI cited by Bloomberg.
- Russia’s seaborne diesel and gasoil exports fell by 6% to about 1.43m mt in H1 from the, Reuters reported.
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FED: Dot Plot: Higher Shift In Outer Years Notable
Jun-18 18:16
The shift in the dot distribution vs March is below.
- It was a predictably close call going into this meeting between 2 cuts (3.9%) and 1 (4.1%) being signalled by the Dots for end-2025. The new Dot Plot shows 9 participants saw 1 or zero cuts, while the remaining 10 eyeing 2 or 3 cuts won the day. However, 7 of 19 members now anticipate no rate cuts this year. We think that the 8 in the 2-cut median probably reflects the core of the Committee including Chair Powell (with Gov Waller probably even more dovish at 3 cuts), but this wasn't far from signalling a higher end-year rate.
- More surprising was the shift higher in outer years, though again this was a close call.
- 10 of 19 now see a cumulative 75bp or less of cuts between now and end-2026, versus just 6 who saw such little easing at the March meeting. That said, there's one member who sees even more cumulative cuts by end-2026 than they expected before, and the median was close to remaining steady at 3.4%.
- For end-2027, there is a clearer shift with 6 dots at 3.1% now appearing in the 3.4% row. 11 of 19 members now see rates at 3.4% or higher by end-2027, versus 8 prior. This median is usually just a little above the longer-run dot, and perhaps this upward shift is reflective of the economic projections' medians showing that the 2% inflation target won't be hit by end-2027.
- On that note, none of the longer-run dot projections were changed vs March's meeting, a modest surprise given some had seen the median itself shifting up at this meeting (it remains at 3.0%).
FED: Economic Projections: Surprising Lack Of "Transitory"
Jun-18 18:05
The 2025 macroeconomic projection revisions were very close to expectations. GDP was revised down 3pp to 1.4% for 2025, with unemployment up 0.1pp to 4.4% and core PCE up 0.3pp to 3.1%.
- Less expected though not a huge surprise is the weaker GDP forecast for 2026, down 0.2pp to 1.6%, with 0.1pp higher unemployment to 4.5%.
- And Core PCE is also not seen returning to target through the 2027 horizon, which was also unexpected, potentially suggestive that the FOMC sees the current government policy mix's impact on inflation as not-quite-"transitory".
- See main variables below.
FED: FOMC Statement Comparison
Jun-18 18:03
FOMC statement comparison: https://media.marketnews.com/FOMC_Statement_Comparison_June_vs_May_ea52e6595b.pdf
