Washington's 10pc tariff on energy imports from Canada has prompted Canadian refiners to consider selling diesel to Europe, according to a source with knowledge of the matter.
The 10pc tariff came into effect on 4 March, alongside 25pc tariffs on non-energy imports from Canada and 25pc tariffs on all goods from Mexico.
Some market participants suggest the need to adjust Canadian diesel quality could hinder exports to Europe. Canadian specifications are more lax than EU specifications in some respects, but comparable challenges are overcome as a matter of routine when the EU imports from the US.
Canada exported 350,000t of diesel and other gasoil to Europe in 2024, according to Vortexa. This accounted for 8pc of the country's total exports, whereas 73pc went to the US.
European market participants note that US importers could look to Europe to replace Canadian gasoline — but price signals are muddied by a seasonal shift in specifications this week. Front-month Nymex Rbob futures surged to a $10.47/bl premium to Eurobob oxy barges on 3 March, from only 77¢/bl on 28 February, but this largely reflects the switch to stricter evaporability rules.
Canada is the primary supplier of seaborne gasoline and diesel to the US — especially to the Atlantic coast. Cargoes loading from US Gulf coast refiners are disadvantaged competitively by the Jones Act, which puts strenuous rules around the vessels that can transport cargoes from one US port to another.
One indirect impact on European product markets could follow if US Gulf coast refineries cut crude runs in response to higher prices for Mexican and Canadian crude. Valero and PBF have both indicated they would consider run cuts.
If the US Gulf coast refined less crude, European traders would likely find stronger arbitrage economics to export gasoline to the US but a weaker arbitrage to import diesel from the US.
