U.S. diesel exports to ARA set to rise on scarce European supply, firm US production
Diesel shipments from the U.S. Gulf Coast to Europe's main trading and refining hub, the Amsterdam-Rotterdam-Antwerp (ARA) region, are set to rise owing to improving export margins on the back of scarce supply in Europe and rising U.S. refinery production, according to traders and ship tracking data.
Europe is seeking higher transatlantic diesel imports, as weaker export margins for shipments from east of Suez slowed flows on that route in the last two months. Rising European gasoil demand also prompted higher transatlantic imports.
Independently held gasoil stocks in ARA fell for the third consecutive week on Thursday to 2.13 million tons, according to consultancy Insights Global.
U.S. diesel exports to ARA could reach all-time high levels above 250,000 barrels per day (bpd) in December, compared with a monthly average of 28,000 bpd over January-October, according to ship tracking data from Kpler based on tankers signaling ARA as the destination. Kpler data dates back to January 2017.
Total U.S. distillate fuel exports, including diesel and gasoil, reached 1.55 million bpd in the week to Nov. 29, the highest seasonal level since Nov. 2018, the Energy Information Administration said.
"Strong U.S. refinery production, improved arbitrage economics, and supply tightness in the European market spurred the uptick in transatlantic diesel shipments," Sparta Commodities analyst James Noel-Beswick said.
Europe is a net importer of diesel, the primary transport and industrial fuel for the continent. Europe diversified its diesel import sources since the EU embargo against Russian oil following Moscow's invasion of Ukraine. Russia was Europe's biggest diesel supplier before the war.
Europe's diesel imports from east of Suez sources fell in recent months. In October and November, east of Suez diesel exports to ARA fell to an average near 100,000 bpd, halving from 224,000 bpd averaged in January-September, according to Kpler.
Still, higher U.S. refinery production could sustain diesel exports to northwest Europe, as U.S. diesel demand remains weak. U.S. refinery utilization rate rose to 93.3% in the week to Nov. 29, compared with the 5-year average for November at 87%, according to EIA data.
"The U.S. Gulf Coast will continue to need to clear excess diesel and much of this will still end up in Europe," Ronan Hodgson, middle distillates analyst at FGE said.
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