The European diesel market is showing signs of tightening as the premium of diesel relative to crude oil reaches a two-month high. The diesel cracking spread (a measure of the profitability of turning crude oil into fuel) rose to around $21 per barrel on Friday, its highest intraday level since April 15, up about 60 cents from Thursday's high. The spot price has also risen relative to futures prices, indicating that traders believe the market is tightening.

Diesel cracking spreads reached a two-month high.

The diesel market in Europe is important because this fuel is a key component of refinery demand on the continent. Europe is also a destination for diesel supplies from other parts of the world.

James Noel-Beswick, an analyst at Sparta Commodities, stated this week that it is not profitable for traders in the region to source crude oil directly from the United States.

He said that the bullish trend in European diesel prices could continue until transatlantic trade becomes profitable. He added that diesel from the Middle East and the Indian west coast tends to flow to Asia rather than Europe.

In addition, the Russian government is reportedly reconsidering its idea of temporarily banning diesel exports. The government wants to prevent diesel from being exported to 'non-producers', i.e. traders, depots, and other participants in the automotive fuel market, because dealers are selling diesel originally intended for the domestic market abroad.

Meanwhile, benchmark crude oil prices are set to post their best weekly performance in over two months, due to optimistic prospects for oil and fuel demand. Brent crude and WTI crude have both risen by more than 4% this week as of press time.