Low Diesel Supply Predicted in Europe as Amsterdam-Rotterdam-Antwerp (ARA) Hub Receives Minimal Imports in August
The trading hub of Amsterdam-Rotterdam-Antwerp (ARA) in northwest Europe is facing a significant shortage of diesel and gasoil in August, causing concerns about low supply levels. Initial predictions from traders are starting to come true, as ARA has received exceptionally little diesel and gasoil this month.
According to Vortexa, ARA only received one Handysize tanker of gasoil in the first six days of August. There have been no larger cargoes, with only a few smaller ones, resulting in a total of approximately 75,000 tons of gasoil, including low-sulphur diesel. This equates to a daily supply of just 13,000 tons, significantly lower than the average of 54,000 tons per day or 1.65 million tons per month during the first seven months of this year.
Moreover, there are only 520,000 tons of diesel signaling arrival at ARA in August. Nearly half of this amount comes from two tankers from Ruwais, UAE, where Adnoc operates a refining complex with a capacity of 817,000 barrels per day. The Long Range 2 (LR2) SKS Donggang is scheduled to arrive on August 11, followed by the very large crude carrier (VLCC) Front Tyne on August 15. While VLCCs typically carry fuels like diesel on their maiden voyage, the Front Tyne has already transported several diesel cargoes from Ruwais since the refinery’s commissioning earlier this year.
Additionally, two Medium Range (MR) tankers are en route to ARA carrying diesel from the US Gulf coast. The Easterly Jupiter from Marathon’s Galveston Bay refinery and the STI Queens from Citgo’s Lake Charles plant are scheduled to reach ARA on August 12 and 16, respectively. It is possible that more cargoes will be identified with ARA as their final destination.
The only Handysize tanker that has arrived in ARA so far is the Zeze Start, which loaded in Dortyol, southeast Turkey. Interestingly, Dortyol has no refining capacity but still receives seaborne diesel and gasoil. Out of the 900,000 tons arriving at Dortyol by sea this year, 80% has come from Russia.
Traders in Europe are raising concerns about scarce resupply in August due to unfavorable economics in both the east and west trade routes. Buyers are struggling to find sellers, while sellers claim to have limited supply. Even if more diesel supply becomes available from countries like the US or east of Suez, it will only reach Europe by the end of August or September.
As a result, European diesel values have rallied, with premiums to North Sea Dated crude at ARA averaging $35.73 per barrel last week, the highest since January before the EU banned Russian products.
The European Ice gasoil futures for the front month also saw a rise, averaging a $24.36 per ton premium against front-month Singapore gasoil swaps, the highest since late June. However, these figures indicate that the east-west route’s arbitrage economics are weaker compared to earlier this year when Ice gasoil averaged a $31.15 per ton premium against Singapore, coinciding with the EU’s ban on Russian products.
Moreover, the movement of naphtha from Europe to Asia-Pacific has led to a reduced availability of LR2 tankers for the diesel trade, driving up freight costs from the Mideast Gulf to northwest Europe. Last week, average freight costs exceeded $40 per ton for the first time since early June.
The scarcity of diesel arrivals in Europe may continue beyond August as heavy refinery maintenance schedules are anticipated in the Middle East and India between September and November. European refiners will also be conducting their seasonal work during these months, with partial maintenance planned at Germany’s largest refineries, BP’s Gelsenkirchen site, and Miro’s Karlsruhe site. Additionally, Portugal’s Galp Sines refinery will undergo work on a crude unit and a fluid catalytic cracker (FCC) in the fourth quarter.
Overall, Europe is facing a potential low supply of diesel in the coming months, causing concerns among market participants. The combination of limited imports, reduced trading routes, and upcoming refinery maintenance schedules is expected to put further strain on diesel availability, leading to potential price increases in the region.
