By Shariq KhanNEW YORK (.) – Traders are rushing to fill up storage tanks along the U.S. East Coast with distillate fuels, like diesel and , data from storage broker The Tank Tiger showed on Monday, a sign of deepening oversupply that is weighing on refiners’ profits.Largely warmer-than-expected winter weather in U.S. Northeast and Europe has cut distillates demand and hit refiners’ margins across the globe in recent months, a factor that drove softer first-quarter earnings by oil majors and top independent refiners.Spreads between and diesel futures, or “cracks” that reflect refining margins, have dropped more than 30% so far this year to under $25 a barrel.Struggling to find outlets for their excess distillates, traders are scrambling to park it in storage tanks in New York Harbor, The Tank Tiger Chief Operating Officer Steven Barsamian said. Storing in the Harbor allows them to export to Europe later in the year when demand improves, he added.Distillates storage demand at New York Harbor jumped to around 300,000 barrels this month, from virtually no bidder interest in March, data from storage firm The Tank Tiger showed. The Tank Tiger’s storage demand data measures bidder interest in leasing storage tanks.Distillates in storage rose by a surprise 1.6 million barrels in the week ended April 19 to 116.6 million barrels, as demand fell 5% from the prior year to 3.55 million barrels per day, the weakest for this time since 2022, government data showed.Rising stocks and weak demand pushed diesel futures into contango in recent weeks, a market structure where a commodity’s current prices are lower than future prices. The shift marked the first time that has happened since 2021 in Europe and first time since June 2023 in the U.S.3rd party Ad. Not an offer or recommendation . See disclosure here or
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.”The bidding up of prompt storage is likely caused by some that think owning this now at lower costs means that distillates will start to jump well above gasoline going into the winter season,” a refined products broker focused on the New York Harbor market said.U.S. refiner Phillips 66 (NYSE:) echoed that view on a conference call with analysts after its first-quarter earnings last week.Refineries along the East Coast and West are switching to producing more gasoline than distillates, which should allay some of the oversupply and help margins recover, the company said.”We are constructive. We do think the market will come back,” Brian Mandell, Phillips 66’s executive vice president of Marketing and Commercial said in response to questions on weaker diesel cracks.Diesel cracks are also very seasonal with natural winter-strength and likewise, natural summer weakness, said Bjarne Schieldrop, SEB’s chief commodities analyst. “There is a lot of focus on weakness in diesel demand and cracks. But we need to remember that we saw the same weakness last spring before the diesel cracks rallied into the rest of the year,” he added.