Asia and the Middle East ramp up diesel exports to Europe in October


SINGAPORE/LONDON, Oct 19 (Reuters) – Oil traders are boosting diesel exports from Asia and the Middle East to Europe in October to take advantage of a wide price gap between regions as strikes by several weeks at French refineries have tightened inventories, although a significant backlog may limit volumes, according to trade sources and shipping data.

The price differential between the Singapore 10ppm sulfur diesel swaps and the ICE low sulfur diesel futures contract, also known as the futures-for-swaps swap (EFS), was close to minus $150 a tonne on Wednesday, from minus $29 a year ago. , data on Refinitiv Eikon showed, making it attractive for traders to send oil to Europe.

“East of Suez sends all it can ship…it’s just a matter of how much China exports in November,” said a Europe-based trader.

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EFS differential

For October, around 289,000 tonnes of diesel will be loaded from South Korea and China to northwest Europe, up from 137,500 tonnes in September, according to ship tracking data from Refinitiv.

Exports from India and the Middle East for October to North West Europe were around 480,000 tonnes and 834,000 tonnes respectively, compared to 361,000 tonnes and 511,310 tonnes a month ago, according to the data.

The trader estimated that Europe could import around 3 million tonnes (750,000 to 850,000 barrels per day) from east of Suez in November, of which the Middle East could account for two-thirds of the volume. Traders expect the bulk of supplies to Europe to come from India and the Middle East, with shorter shipping times.

Asia’s major fuel exporters South Korea and Taiwan have launched a flurry of spot tenders this month, while China will also ramp up diesel exports after increased allocation from Beijing.

RAPID REVERSE

However, outages at TotalEnergies’ (TTEF.PA) refineries in France caused by workers’ strikes since September have led to diesel prices surging from those in coming months, a market pattern known as the deportation, which poses risks to the value of oil cargoes traveling long distances such as from Asia to Europe. Read more

A steep offset, which is already deterring traders from stockpiling diesel around the world, could prevent much-needed fuel oil from reaching Europe this winter as the region cuts imports from the main Russian supplier ahead of a European Union embargo in February.

Spread Nov-Dec

“Some end consumers were stockpiling Russian diesel, but now with the French strikes the market has tightened and we have a sharp pullback,” said a Europe-based trader.

“So there’s a big commercial incentive to dip into inventory, which will make buying diesel worse.”

Profit margins for northwest European diesel barges hit more than $83 a barrel on Tuesday, a record high, amid tight supply.

Soaring diesel prices in the United States have already led traders to divert several shipments from the Middle East to Europe to the New York port area, further limiting supply in Europe. Read more

“European [gasoil] the cracks could drop another $10-15 a barrel once the strikes end, which would make it risky for Asian barrels to head here even on a fast-loading basis given the steep offset, although arbitrage is technically open on paper,” said Mark Williams, research director at Wood Mackenzie.

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Reporting by Trixie Yap, Ron Bousso; additional reporting by Ahmad Ghaddar and Rowena Edwards in London, editing by Florence Tan and Devika Syamnath

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