Europe imports more diesel from MidEast, Asia to replace Russia
Europe is increasingly turning to non-Russian suppliers for its diesel needs with imports of the fuel this month on track to reach a three year high, data from oil analytics firm Vortexa showed.
The data, covering Sept. 1-11, showed Europe on course to import 1.65 million barrels per day (bpd) of diesel this month, up from 1.46 million bpd last month, and the highest since August 2019.
It also showed diesel imports from Russia accounted for 44% of the total so far in September, down from 51% in the whole of August and 60% in July.
At the same time, the Middle East’s share of European diesel imports reached 30%, up from 23% in August.
Imports from the Middle East for the whole of September are set to rise about 50% from August to 500,000 bpd, their highest since May 2018, the data showed.
Imports from Asia are set to remain broadly steady at around 225,000 bpd in all of September versus August, but are over three times higher than in July, and near last November’s recent high, the data showed.
Indian and Chinese refineries, which normally export diesel to Europe, have ramped up purchases of Russian crude this year at big discounts, as traditional buyers in Europe and elsewhere pull back.
The rise in imports comes amid acutely low distillate storage levels in Europe, not helped by a backwardated market structure that discourages storage economics.
“The diesel imports can … be explained … by distributors in Europe planning for end of year sanctions by stockpiling now while outright prices have taken a dip,” a European trader said.
The European Union will stop buying all Russian crude oil delivered by sea from early December, and will ban all Russian refined products two months later, in protest over Moscow’s invasion of Ukraine.
Having hit an all time high of nearly $77 a barrel in early March as the market feared big supply outages from Russia, European benchmark barge diesel margins have softened, reaching about $53 a barrel on Tuesday, according to Reuters assessments.
Adding to tightness in the diesel market has been a wave of refining capacity shutdowns that accelerated in the wake of the COVID-19 pandemic.
Crude oil refining capacity has shrunk by a record 3.8 million bpd from March 2020 to mid-2022 as demand expanded, setting the stage for fuel markets to remain very tight until at least mid-decade, International Energy Forum and S&P Global research showed.
Source: Reuters (Additional reporting by Rowena Edwards Editing by Mark Potter)