Diesel and gasoil cargo arrivals from the US to the EU and UK rose in July to the highest for five years, supplying additional demand in the Mediterranean region and in Germany.
The EU and UK imported 1.19mn t of US diesel and gasoil in July, an increase of 41pc on the month and almost four times higher than a year earlier, according to Vortexa. This made the US the top diesel supplier for the first month this year, having only emerged as one of the top three suppliers in May after the EU banned imports of Russian product.
The US was able to meet higher seasonal demand, and cover for two regional supply developments.
Extreme heat led to lower refining activity in the Mediterranean basin, reducing operational output by up to 10pc according to a source, and adding to production downtime. In Italy, Eni's 88,400 b/d Livorno refinery had been offline since late April, and in Spain a fire at Repsol's 220,000 b/d Petronor refinery took offline a 130,000 b/d crude distillation unit (CDU) that offset the return of a CDU at the firm's 120,000 b/d Coruna site after nearly three months.
US diesel deliveries to Spain rose to 185,500t in July, up by a quarter from June and the highest since October 2020, Vortexa data show.
There was also supply tightness in northwest Europe after an outage at Shell's 404,000 b/d Pernis refinery in the Netherlands — Europe's largest — coincided with low water levels on the Rhine river, along which diesel moves to Germany. This prohibited diesel barges from travelling fully-laden from the Amsterdam-Rotterdam-Antwerp (ARA) region, where a tighter supply situation was developing as independently-held gasoil stocks fell by 8pc on the month.
This pulled in US diesel cargoes to Hamburg. German imports of US diesel almost doubled on the month to a record 202,200t.
Transatlantic arbitrage economics have improved since the start of this year, and US cargo deliveries to Europe were more attractive in July than in June according to Argus calculations. Ice gasoil second-month futures were at an average discount of $26.23/t against US Gulf Coast ultra-low sulphur diesel in the month, narrowing considerably from an average discount of $55.20/t in January.
A clear majority of US diesel cargo deliveries to Europe load in the US Gulf.
Europe's other top diesel suppliers also increased shipments in July. Mideast Gulf cargoes matched May's 1.75mn t, and India supplied 1.06mn t — the highest on Vortexa records going back to 2016.
It remains to be seen if US diesel flows will be maintained. Traders receiving diesel cargoes from the US Gulf in recent weeks say the transatlantic arbitrage opportunity is closed, and they are turning instead to European-origin cargoes.
