High stocks send European diesel to Florida

More European diesel has been flowing to Florida over the past three months, as surplus-laden European suppliers sought new outlets.

The tanker Jo Kari is scheduled to deliver around 260,000 bl of diesel to Port Canaveral, Florida, on 16 January, after loading in Antwerp, Belgium on 1 January, Vortexa data show. This marks the third diesel cargo on this route in as many consecutive months. Prior to November last year, very little diesel moved from Europe to Florida.

Florida is mainly supplied by domestic barges from the US Gulf coast on Jones Act-compliant vessels to which higher freight rates apply, as well as foreign imports. Foreign imports are not subject to the Jones Act, and may have been aided by cheap international freight rates.

The Europe-US Atlantic coast freight rate averaged $11.67/t for the last two months of 2020, compared to an average of $24.16/t during the same period in 2019.

But more importantly, European diesel demand has been sagging under Covid-19 containment measures, and diesel stockpiles in the EU-15 and Norway hit their highest level in at least 30 years last November, according to Euroilstock.

While the US Gulf coast has seen similar excess build up over the past ten months, it is more unusual for Europe to see such surplus in its diesel market, given the region is structurally short diesel and is a regular importer of the fuel from the US Gulf coast.

European diesel suppliers would have had to compete with other regular, international suppliers of diesel to Florida, including Colombia and Canada, both of which have a freight advantage due to closer distance.

The US Gulf coast remains by far the top waterborne diesel supplier to Florida, having sent 30,000 b/d of the fuel by barge to Florida in 2020, compared to 14,200 b/d of international imports, Vortexa data show.

By Chunzi Xu