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Middle Distillate Strength and Storage Strain: How September’s Market Dynamics Shape the ARA Outlook

September 2025 was a month of contrasts: crude prices rose on supply fears, middle distillate cracks strengthened on reduced exports, yet storage economics stayed firmly negative. While volatility eased, the forward curves maintained a backwardated structure—pressuring storage operators but driving strong throughput flows. From an ARA perspective, this combination of bullish fundamentals and constrained economics reinforces the importance of agility and product flexibility in terminal operations.

1. Crude Prices Strengthen Amid Supply Risks

Brent crude gained more than 4% during the month, closing around $69–70/bbl in late September. Prices were driven upward by Russia’s decision to extend its diesel export ban until the end of the year, ongoing Ukrainian drone attacks on Russian refining infrastructure, and tightening global inventories.
Meanwhile, the US market added further support after GDP growth for Q3 was revised upward to 3.8% annualised, raising optimism for continued fuel demand.

Strategic takeaway: The upward trend in prices reflects an increasingly fragile supply environment. For ARA terminals, it reinforces the likelihood of higher throughput and re-export activity as Europe substitutes missing Russian product with imports from the Middle East and the US.

2. Forward Curves: Steep Backwardation Persists, with Hints of LSFO Contango

The September forward curve analysis (pages 2–3) shows that middle distillates remained in steep backwardation, while light ends such as gasoline and naphtha softened. Interestingly, the LSFO (low-sulphur fuel oil) curve developed a small short-term contango of about $2/ton, the first in months.

Strategic takeaway: While the LSFO contango is too small for a viable storage play, it may signal the start of a market rebalancing, with some product segments edging closer to oversupply. For terminals, this is a subtle but important signal to prepare for potential changes in tank utilisation toward fuel oil and blending operations.

3. Storage Economics: Still Deeply Negative

All major product categories remained below the breakeven threshold throughout the month:

  • RBOB: -€6.91 (M1–M3), -€3.51 (M1–M6)
  • EBOB: -€13.30 (M1–M3), -€7.08 (M1–M6)
  • LS Gasoil: -€8.59 (M1–M3), -€7.94 (M1–M6)
  • Jet Kerosene: -€5.85 (M1–M3), -€6.11 (M1–M6)

These negative breakeven rates clearly indicate that storage remains unprofitable, with traders unwilling to commit to long-term leasing.

Strategic takeaway: Terminals should prioritise throughput-driven contracts and operational services such as blending, additive handling, and barge coordination. This focus mitigates the impact of backwardation on revenue while preserving client engagement.

4. Product Cracks: Middle Distillates Dominate, Light Ends Lag

As seen on page 9, product crack spreads showed a clear divergence:

  • Jet and diesel cracks rose by more than 9% week-on-week, supported by reduced Russian exports and strong seasonal aviation demand.
  • Gasoline and naphtha cracks fell sharply (gasoline -7.5%, naphtha -19.6%), signalling the end of summer demand and weaker petrochemical activity.

ARA gasoline stocks rose 3% to their highest level since July, driven by stronger blending activity and congestion at Amsterdam terminals as barges lined up to discharge components. Meanwhile, middle distillate imports into ARA increased modestly, though demand up the Rhine slowed due to high water levels.

Strategic takeaway: The product market divergence confirms a shift toward distillate-centric demand in Europe. Terminals with flexible tank configurations—able to switch between gasoline and gasoil—are best positioned to capture this evolving flow pattern.

5. Regional Stock Dynamics: ARA in Focus

The Global Oil Stocks data on page 11 shows a mixed picture:

  • USGC: Light ends decreased slightly (-0.50 Mcbm 3-month trend), while middle distillates grew modestly.
  • ARA: Light ends averaged 2.4 Mcbm with a neutral short-term trend, middle distillates around 3.6 Mcbm, and heavy products roughly 1.2 Mcbm.
  • Singapore: Stocks trended downward, especially for heavy products (-0.59 Mcbm over 3 months).
  • Fujairah: Stable middle distillates, but heavy stocks declined 24% m-o-m after reaching multi-year lows earlier in the quarter.

Strategic takeaway: ARA’s stable inventory base underscores its continued role as Europe’s primary redistribution hub, even as global stock patterns fragment. Maintaining operational readiness for regional arbitrage opportunities—especially toward the Med and West Africa—remains essential.

Conclusion: Managing Tightness Through Flexibility

September’s market dynamics underline a fundamental truth for the tank terminal industry: when storage economics falter, flexibility becomes the main differentiator.

  • Crude and product prices are supported by supply risk rather than demand strength.
  • Forward curves suggest backwardation will persist into Q4.
  • Light ends weaken, while middle distillates remain the revenue driver.

For ARA terminals, the challenge lies in balancing strong product movement with structurally weak storage incentives. Operators that enhance service versatility, streamline throughput handling, and maintain readiness for arbitrage-driven flows will be best placed to thrive in this tight yet dynamic market.

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