Episode summary
What Is the Outlook for Diesel and Gasoline Supplies?
The Markets
· · 8 min · Guests: Nitin Jindal
Summary
Nitin Jindal said the most surprising part of the Strait of Hormuz disruption has been the market’s resilience, with prices staying within a tolerable range despite what he called a major supply shock. He argued that crude oil itself may avoid a near-term break because summer demand is ending, but refined products are much tighter and more vulnerable because the refining complex remains constrained.
He pointed to lower product flows from the Persian Gulf, Russia, and China as the core reason diesel, gasoline, and jet fuel markets are tight. Jindal said he is constructive on crack spreads, especially contracts like Cal 27 cracks, because the market is not fully pricing continued disruption. He also said China has adjusted more than many expected, helped by rapid EV adoption and large additions to electricity capacity.
On natural gas, Jindal said Europe’s outlook depends heavily on winter weather: a very warm winter could bail out the market, but a normal winter would leave Europe tight and force China to back off. He added that China may be able to reduce LNG imports somewhat, but not enough to offset the supply loss from Qatar. His preferred trades included long crack spreads, long Asian hydrocarbons versus US hydrocarbons, US natural gas into winter, gold as a debasement trade, and US power tied to the AI theme.
Key takeaways
- Jindal said crude oil is less likely to break in the next few months, but refined products remain “a very tight products market.”
- He likes being long crack spreads, especially Cal 27 cracks, because he thinks the market is not pricing continued disruption.
- Jindal said China has adjusted to supply stress more than expected, helped by EV growth and 500 gigawatts of new power capacity last year.
- He sees Europe’s gas balance as weather-dependent: a normal winter would keep the market tight and force China to compete for gas and coal.
- Jindal also likes long Asian hydrocarbons versus US hydrocarbons, US natural gas into winter, gold, and US power tied to AI demand.
Notable quotes
“we are at a four-and-a-half-year point, and nobody would have ever predicted at any point that that conflict would go this long”
“the world ex-Persian Gulf, ex-Russia, ex-China is tight products, and there is no immediate release valve which is coming”
“We like being long crack spreads, right? Specifically, term like Cal 27 cracks are not, you know, pricing continued disruption”
“If you get a normal winter, you have a very tight setup going into this winter”
How the episode opens
This is The Markets. I'm Chris Hussey, and today is Wednesday, August 26th, and we're here on the Goldman Sachs trading floor with Nitin Jindal, who heads up our global commodities business within global banking and markets. Nitin, thanks so much for joining us on The Markets.
It's a pleasure. Thank you. Okay.
I want to start with a breaking point question because we're about to celebrate, celebrate is not the right word, the sixth straight month of the Strait of Hormuz being closed. Has it surprised you that this has not disrupted the commodity markets more, or do you think we really are at a breaking point? Several things have surprised me, right?
First, just the length of the war. That's surprising. But it shouldn't be surprising given what is happening in Europe, where we have-- we are at a four-and-a-half-year point, and nobody would have ever predicted at any point that that conflict would go this long.
The other thing which is very surprising is how resilient the market has been in terms of finding supplies and not actually breaking down. Yeah. There are several things which have- which were done, several protective measures which were taken.
Still, have a major, epically major disruption in the market, and prices are, you know, within a tolerable range. Okay, let me explore this one element around inventories. Cause some of the pictures I've been seeing lately is oil inventories are coming down now, and they're down to levels where we haven't seen them normally.
Does that get you concerned that we're going into a place where we just have no more oil to give back and we're finally going to get that breaking point? If you'd have asked me that question two months ago, my answer would have been absolutely yes.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- diesel gasoline supplies
- strait of hormuz shipping disruption
- refined product market outlook
- china energy adjustment
- europe natural gas prices
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “What Is the Outlook for Diesel and Gasoline Supplies?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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