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Asian fuel sellers are increasing their shipments of diesel to energy-starved Europe, benefiting from the premium European buyers are willing to pay for the fuel amid a deepening global and regional deficit.
Global diesel inventories have declined precipitously since demand rebounded over the last two years, largely due to a decline in refinery capacity during the pandemic.
The refinery workers’ strike in France certainly did not help matters in Europe specifically, adding to diesel supply woes, perhaps the most important of the oil derivatives as it fuels transport and agriculture.
"East of Suez is sending everything they can ship... it's just a question of how much China exports in November," one unnamed trader told Reuters this week. The agency cited tracking data as showing that loadings of gasoil from China and South Korea to northwestern Europe this month could reach 289,000 tons, up from 137,500 tonnes in September.
Yet the shortage is not limited to Europe. In fact, one of Europe’s biggest fuel suppliers is now snapping cargoes back. Per another Reuters report, from earlier this week, at least two cargos of diesel fuel and jet fuel originally scheduled to arrive in Europe were diverted to the U.S.
Distillate fuel stocks in the U.S. are at decades-low and refineries are not ramping up production in any meaningful way, likely for a lack of processing capacity.
Meanwhile, India and Middle Eastern countries are also sending more distillates to Europe. Indian exports to northwestern Europe this month were seen at 480,000 tons, per Refinitiv data cited by Reuters. Middle Eastern exports were calculated at 834,000 tons. Both figures are substantial increases from September's export rates.
Volumes will likely grow further in November, too, according to industry insiders. Reuters quoted its trading source as saying that shipments from east of Suez could reach 3 million tons next month, with Middle Eastern producers accounting for about two-thirds of this total.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.