European diesel
Overview
As the most consumed refined product in Europe, diesel is a fundamental source of road fuel. But without sufficient local refining capacity to cover demand, the region is dependent on imports of this critical product.
Since the imposition of sanctions on Russia, previously a major source for European markets, diesel trade flows into the region have transformed. Diesel is now imported from further afield into large ports and on vessels up to three times bigger. It is then redistributed to the rest of the region, creating an export flow from the Amsterdam-Rotterdam-Antwerp (ARA) hubs.
With a transformed market, you need price assessments that are transparent, and represent current market conditions and trade flows.
Diesel in Europe explained
Benedict George, Editor of Argus European Products report, explains how the diesel market has evolved and why we changed the way in which we assess diesel prices in northwest Europe.
Argus provides independent price assessments for the new diesel trade flows in Europe
European oil refining: Capacity for future volatility
Read insight paper to understand what’s driving today’s volatility—and what could define Europe’s refined product markets next.
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UK's Grangemouth refinery stops processing crude
UK's Grangemouth refinery stops processing crude
London, 29 April (Argus) — The Petroineos joint venture's 150,000 b/d Grangemouth refinery in Scotland has stopped processing crude and the company will now import transport fuels to meet demand, it said today. The move ends more than 70 years of refining at Grangemouth, and around 400 workers will lose their jobs. The closure removes 13pc of the UK's refining capacity, which will probably increase the country's reliance on imported refined products. Petroineos — a joint venture between PetroChina and UK-based Ineos — said in November 2023 it would close the refinery in spring this year, later deciding to repurpose the site to an import and distribution terminal. It said today it has invested £50mn ($67mn) in this. Petroineos rejected a call from UK labour union Unite for the refinery to be converted into a a sustainable aviation fuel (SAF) plant. London has said it would provide £200mn for investment in clean energy at the Grangemouth site, which it hoped would unlock private sector funds. Unite today said "for all the talk, nothing has been done", and said the closure was because the UK and Scottish governments "have effectively allowed China to shutdown Scotland's capacity to refine fuel". Slow death UK refinery output dropped to a 17-month low in March, reflecting Grangemouth's gradual drop in run rates ahead of processing its final barrel. The effect on national fuel balances has already been felt, with UK gasoil imports at an almost six-year high of 1.484mn t in April, and net gasoline exports the lowest on record at 65,000t, according to the country's latest submission to the Joint Organisations Data Initiative (Jodi). The Grangemouth closure is one of three major refinery shutdowns planned this year in Europe. In Germany, Shell began to close its 147,000 b/d Wesseling refinery in March , and BP plans to remove a third of the crude distillation capacity at its 257,000 b/d Gelsenkirchen site this year . This removal of 400,000 b/d of capacity represents around 3pc of Europe's total. This year's plant closures are widely expected to exacerbate a supply squeeze of middle distillates on the continent, while failing to address a growing gasoline supply overhang exacerbated by the ramp-up of production from Nigeria's 650,000 b/d Dangote refinery. Further unplanned European refinery closures are anticipated by market participants as product margins slide from post-pandemic highs and elevated overheads squeeze operating profits. By George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
Saras sees diesel margin improvement later in the year
Saras sees diesel margin improvement later in the year
Barcelona, 14 May (Argus) — Italian independent refiner Saras said today it expects diesel margins to rise later in the year, boosting profits at its 300,000 b/d Sarroch refinery. The comapny said there has been a "drastic decline" in regional diesel margins since the first quarter of the year, caused by cargoes from the US arriving at the same time as supplies from east of Suez that had been delayed by taking the longer Cape of Good Hope route. This is not necessarily bad for Saras' profits, said the firm's chief operating officer Marco Schiavetti. "All these logistic de-optimisations are supporting diesel cracks in particular, volatility in the market is supportive for the business in general," he said. The company expects diesel margins to rise later in the year. Saras said today that some maintenance works on Sarroch's crude distillation units (CDU) would take place in the second quarter and again in the fourth quarter. There will also be works in both periods on the firm's adjacent IGCC power plant. Saras' prospective purchase by trading firm Vitol could close within a couple of months. Saras' chairman Massimo Moratti said there are "no obstacles" to the deal from Italian authorities, with the firm waiting on EU approval including regulations on antitrust law. Deputy chief executive Franco Balsamo said: "We do not have any disclosure on the expected end of the process, but in my point of view in a couple of months we should receive a green light from the EU." There has not yet been co-operation between Saras and Vitol regarding refinery operations, said Balsamo. "Vitol is one of the largest broker in this market so we have regular business with them when there are mutual economic conditions," he said. "But as far as any formal co-operation it is not the right time. We are waiting for all the necessary procedures." The company made a profit of €77.4mn ($83.5mn) in the January-March period, lower by 44pc from the first quarter of 2023. Profits were very similar to €76.6mn in the first quarter of 2022 when refining margins began rising following the Russian invasion of Ukraine at the start of February that year. Company crude throughput forecast has historically been changeable. But 2024 guidance remains the same as previous statements at 265,000-275,000 b/d. The firm said its first quarter crude gravity was 32.5°API almost identical to Argus ' assessment of the refinery slate . By Adam Porter Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
European refineries suffer from under-investment
European refineries suffer from under-investment
European refiners are shutting capacity again, but tight diesel supply could give them a last hurrah, writes Benedict George London, 5 January (Argus) — Falling demand for fuels has been dissuading many European refiners from investing in their plants, with the result that assets are deteriorating and some closing altogether. But extraordinary margins are still achievable in the short term for those that can stay on line. Argus reported 14 separate incidents in which a European refining unit had to close because of a fire, leak, power outage or other accident in 2023 — up from 12 in 2022. Under-investment has been exacerbated by circumstances. European costs are uncompetitive against those in the Middle East or Asia. European oil demand is declining, but growing in those other regions. Ageing units have been undermaintained since 2020 because of the pandemic and then a reluctance to miss out on resurgent margins by halting units for upkeep. A prolonged heatwave last summer added further mechanical stress. The EU ban on Russian crude has pushed some units to run lighter slates than they were designed for. The inevitable result of long-term under-investment and underperformance is permanent closure. This trend has been evident for decades and came to the fore again late last year, after extraordinary margins for most of 2022 and 2023 led to a pause. UK-Chinese joint venture Petroineos announced in November that it is beginning the process of converting the 150,000 b/d Grangemouth refinery in Scotland into an import terminal — work it expects to complete in 2025. "Refinery margins are forecast to normalise over the medium term, resulting in a reversion to loss-making for our business," Petroineos told Argus . Six European refineries have closed since 2020. Grangemouth will bring that to seven and Shell's 147,000 b/d Wesseling refinery in western Germany will make it eight if they both close in 2025. These closures will bring a 935,000 b/d capacity loss. Italian refineries look most vulnerable. Eni told workers as long ago as 2021 that its 84,000 b/d Livorno facility would stop refining crude by 2022, to focus on base oils and biofuels. This has not happened yet, perhaps because conventional refining margins have been so high. Oil traders said the Eni-KPC 241,000 b/d Milazzo refinery in Sicily is comparatively unprofitable too. Major retreat The majors also keep edging away from European refining through divestments. TotalEnergies, Shell and ExxonMobil have exited eight European refining assets between them since 2020. Most recently, ExxonMobil sold its 25pc stake in southern Germany's Miro refinery in October 2023, and Shell its 37.5pc stake in Germany's Schwedt to UK-based Prax. In the shorter term, European refiners are likely to keep reaping profits that are extraordinary by historical standards. Falling regional capacity and frequent outages are buoying the margins of those that manage to stay on line. Without political rapprochement with Russia, diesel supply lines will remain long and unreliable, keeping margins high in Europe. The forecast recovery of European economic growth in 2024 could add demand and push margins still higher. TotalEnergies chief executive Patrick Pouyanne noted that the firm's refineries are already "running to make diesel" because the loss of Russian supply has kept diesel margins elevated despite weak demand. If production cannot rise to match a demand recovery, margins respond more strongly. But if planned refining capacity opens in other regions, European plants might face stiffer competition. Oman's 230,000 b/d Duqm and Nigeria's 650,000 b/d Dangote refinery could start up fully in 2024, while Kuwait's 615,000 b/d al-Zour refinery could begin shipping diesel west too. But the only seemingly reliable thing about new refinery start-ups is that they do not happen on schedule. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Viewpoint: European refineries suffer underinvestment
Viewpoint: European refineries suffer underinvestment
London, 29 December (Argus) — Falling demand for fuels has been dissuading many European refiners from investing in their plants, with the result that assets are deteriorating and some closing altogether. But extraordinary margins are still achievable in the short term for those that can stay online. Argus reported 14 separate incidents in which a European refining unit had to close because of a fire, leak, power outage or other accident in 2023 — up from 12 in 2022. Underinvestment has been exacerbated by circumstances. European costs are uncompetitive against those in the Middle East or Asia. European oil demand is declining, but growing in those other regions. Ageing units have been undermaintained since 2020 because of the Covid-19 pandemic and then a reluctance to miss out on resurgent margins by halting units for upkeep. A prolonged heatwave in summer 2023 added further mechanical stress. The EU's ban on Russian crude has pushed some units to run lighter slates than for which they were designed. The inevitable conclusion of long-term underinvestment and underperformance is permanent closure. This trend has been seen for decades and resumed in late 2023, after extraordinary margins for most of 2022 and 2023 led to a pause. UK-Chinese joint venture Petroineos announced in November that it is beginning the process of converting the 150,000 b/d Grangemouth refinery in Scotland into an import terminal in 2025. "Refinery margins are forecast to normalise over the medium term, resulting in a reversion to loss-making for our business," Petroineos told Argus . Six European refineries have closed since 2020. Grangemouth will increase that to seven and Shell's 147,000 b/d Wesseling refinery in western Germany will make it eight if they both close in 2025. Those eight mean a total loss of 935,000 b/d of capacity. Italian retreat Italian refineries look most vulnerable. Eni told workers as long ago as 2021 that its 84,000 b/d Livorno refinery would stop refining crude by 2022, to focus on base oils and biofuels. It has not happened yet, perhaps because conventional refining margins have been so unexpectedly high. Oil traders said the Eni-KPC 241,000 b/d Milazzo refinery in Sicily is comparatively unprofitable too. The majors keep edging away from European refining through divestments too. TotalEnergies, Shell and ExxonMobil have exited eight European refining assets between them since 2020. Most recently, ExxonMobil sold its 25pc stake in the southern German Miro refinery in October 2023, and Shell its 37.5pc stake in Germany's Schwedt to UK-based Prax. In the shorter term, European refiners are likely to keep reaping extraordinary profits by historic standards. Falling regional capacity and frequent outages are helping the margins of those who manage to stay online. "If we have outages, then, all of a sudden, [refined product] prices start to increase," BP interim chief executive Murray Auchincloss said on the company's third quarter earnings call. Without political rapprochement with Russia, diesel supply lines will remain long and unreliable, keeping margins high in Europe. The forecast recovery of European gross domestic product (GDP) growth in 2024 could add demand and push margins still higher. TotalEnergies' chief executive Patrick Pouyanne noted its refineries are already "running to make diesel" because the loss of Russian supply has kept diesel margins at historic highs despite weak demand. If production does not have room to rise to match a demand recovery, margins respond more strongly. But if new refining capacity opens in other regions as planned, European refiners may face stiffer competition, hurting their margins and vindicating plans to close units. The key examples are Oman's 230,000 b/d Duqm and Nigeria's 650,000 b/d Dangote refinery, which could start up fully in 2024. Kuwait's 615,000 b/d Al-Zour refinery could avoid mishaps and begin shipping diesel west as expected too. But the only thing seemingly reliable about new refinery openings is that they will not happen on schedule. By Benedict George Send comments and request more information at feedback@argusmedia.com Copyright © 2023. Argus Media group . All rights reserved.
