Geopolitical Tensions and Seasonal Tightness Drive October’s Product Market Recovery
October 2025 marked a clear shift in oil market sentiment. After months of weakness, crude and product prices rebounded as new US and EU sanctions tightened Russian oil flows, and seasonal heating demand began to build. The combination of geopolitical shocks, shifting trade routes, and refinery maintenance across Northwest Europe (NWE) reshaped market fundamentals—presenting both challenges and opportunities for tank terminal operators, especially in the ARA region.
1. Crude Market Recovery Fueled by New Sanctions
Brent crude rebounded from a five-month low in early October to trade near $66–68/bbl by mid-month, driven by new US sanctions on Rosneft and Lukoil and EU restrictions on Russian LNG imports. India and China—key importers of discounted Russian crude—were urged to reduce purchases, forcing refiners to seek alternative supplies from OPEC members and the US.
By the end of October, however, the rally eased as stronger US dollar and weak Chinese industrial data limited gains. Despite this, OPEC’s cautious production strategy and US strategic stock builds kept the forward curve in backwardation, signalling a structurally tight market.
Strategic takeaway: Europe now faces intensifying competition for non-Russian oil products, as Indian, Chinese, and Turkish refiners must prove the absence of Russian feedstock in their exports—an increasingly difficult task without fully excluding Russian crude. This dynamic may tighten supply of compliant barrels, increase premiums on traceable cargoes, and complicate Europe’s sourcing strategy for clean and middle distillates.
2. Storage Economics: Still Deeply Negative Across All Products
Break-even (BE) rates show the monthly storage fee per cubic metre at which traders would break even on a contango play. Negative values therefore mean that even if storage were free, traders would still lose money due to the backwardated market structure.
On 24 October, BE rates (€/cbm/month) stood at:
- RBOB: –6.01 (M1–M3)
- EBOB: –8.13 (M1–M3)
- LS Gasoil: –9.38 (M1–M3)
- Jet Kero: –8.77 (M1–M3)
By 31 October, all products remained below zero and, for some, became even more negative — particularly gasoil (–11.48) and jet fuel (–9.94). This underlines that the market moved deeper into backwardation, with no sign of a shift toward contango that could reopen storage arbitrage.
Strategic takeaway: The trend confirms that profitable storage remains out of reach. Terminals should continue prioritising throughput-based business and short-term flexibility, while monitoring early signs of a potential shift if distillate backwardation starts to flatten in Q1 2026.
3. Middle Distillates Lead the Recovery
Middle distillates were the clear outperformers in October. ICE Gasoil futures surged by more than 11%, crossing the $700/ton mark amid renewed supply concerns and pre-winter restocking activity. By the end of the month, gasoil settled near $718.50/ton, its highest level since summer, while jet cracks climbed roughly 6%, surpassing previous seasonal highs.
Within the ARA region, middle distillate stocks increased slightly through October, following several weeks of strong import arrivals from the US, Qatar, and India. This steady build reflects Europe’s shift toward securing additional non-Russian diesel and jet fuel supply ahead of the heating season.
Strategic takeaway: The firm upward trend in gasoil and jet prices signals a healthy throughput environment for ARA terminals. Terminals focused on efficient product handling, turnaround capacity, and jetty access can capture value as traders and refiners position for elevated winter demand — even as storage economics remain unattractive.
4. Gasoline Markets Stabilise as Dangote Restarts
Gasoline markets were more mixed. In early October, exports from ARA to West Africa and the US surged due to an ongoing FCC outage at Nigeria’s Dangote refinery, pushing ARA stocks down 4–5%.
By mid-October, signs of a gradual restart at Dangote and refinery maintenance in NWE reduced export volumes.
By late October, US gasoline demand rebounded strongly, pulling transatlantic cargoes out of Europe and pushing USGC prices up 4% week-on-week, while ARA prices fell to ~$706/ton.
Strategic takeaway (ARA view): The resumption of Nigerian output could limit ARA gasoline exports in coming months, but US demand strength offers an offsetting outlet for transatlantic trade.
5. Global Stocks Reflect Regional Rebalancing
- ARA: Light ends at 2.39 Mcbm (–0.08 trend), middle distillates at 3.63 Mcbm (+0.15 trend).
- USGC: Stable total stocks near 24.5 Mcbm, with moderate draws in light ends.
- Singapore: Middle distillates down to 4.0 Mcbm (–0.04 trend), reflecting weaker Asian demand.
- Fujairah: Middle distillate inventories rose 0.09 Mcbm, driven by reduced exports to Europe.
Strategic takeaway: ARA’s steady stock builds in distillates contrast with declining Asian inventories, confirming Europe’s temporary pull on product flows ahead of winter.
6. Product Cracks Strengthen Despite Crude Volatility
Product cracks strengthened further in October, particularly for diesel and jet fuel, which rose by around 5–6% week-on-week. Gasoline was the only major product to ease slightly as seasonal demand tapered off.
The gains in middle distillates were driven by a combination of refinery outages in Northwest Europe and abroad, alongside persistently firm product demand across Europe and the Atlantic basin. These outages tightened regional supply, drawing down stocks and supporting margins.
As a result, refinery margins in Northwest Europe remained elevated, with Brent cracking margins averaging around $14/bbl—slightly below the previous week’s $16/bbl peak but still among the highest levels of the year. The tighter balance between supply and demand continues to underpin high utilisation of logistics and storage infrastructure.
Strategic takeaway: For ARA terminals, this environment translates into strong product movement and high turnover, as traders manage shorter delivery cycles and refineries prioritise meeting inland and export commitments. The combination of lower product stocks and resilient demand will likely keep throughput robust into the winter months.
Conclusion: A Market Turning Point for Operators
October underlined how geopolitical decisions and structural supply disruptions are reshaping product trade flows worldwide. The combination of new sanctions, refinery outages, and stronger regional demand has not only tightened product balances but also redrawn traditional shipping and supply routes.
Flows that once moved predictably from Russia and the Middle East toward Europe are being rerouted, diversified, and fragmented. India and China are adjusting import strategies under sanction pressure, while the US and Middle East suppliers are stepping in to fill the gaps — often through longer, more complex supply chains. These changes are creating new logistical patterns, shifting the balance between storage, blending, and throughput demand across key hubs.
For terminals in Europe, this means managing greater variability in cargo origins and destinations, shorter lead times, and fluctuating tank utilisation. Meanwhile, terminals in Asia and the Middle East are increasingly positioning themselves as swing suppliers, bridging regional imbalances rather than serving as traditional export platforms.
In this environment, operational flexibility and commercial responsiveness will be the defining advantages. Terminals that can quickly adjust to these evolving trade dynamics — whether in Europe, Asia, or the Americas — will be best placed to capture value as global oil logistics enter a new phase of volatility and redistribution.
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