The northwest European diesel market has seen the first ever bids for fob cargoes on a public platform, as fob ARA trade has grown in importance for the region since the exclusion of Russian products by EU and UK sanctions.
Trading firm Trafigura placed two bids today for 30,000t French winter diesel cargoes on a fob ARA basis, the highest priced at an $8/t premium to Ice December gasoil, for loading between 6 and 10 December. The bids were placed on the Argus Open Markets (AOM) price discovery platform.
The most liquid public market for diesel in northwest Europe is the German diesel barge market at ARA, leaving the trade in French diesel opaque in recent weeks, with market participants noting difficult price discovery. Participants said French diesel prices are unusually far below German prices.
The French fob ARA diesel cargo trade has grown in importance for the European market since EU sanctions banned Russian imports in February. This made the region far more dependent on imports from long-haul destinations east of Suez. These mainly involve Long Range 2 (LR2) tankers with capacity of around 100,000t, to keep freight costs down. Most ports in Europe do not have berthing capacity to accept such large tankers fully loaded, so they often discharge in the Amsterdam-Rotterdam-Antwerp (ARA) hub and the product is re-loaded on smaller tankers.
Diesel and gasoil loadings from ARA hub on Handysize tankers — with capacity around 30,000t — have increased by around 50pc since February, according to Vortexa, compared with the 2022 average. The average has been around 560,000 t/month since February, up from around 380,000 t/month in 2022. It was only around 340,000 t/month between 2016 and 2019, before it dipped during the Covid pandemic.
Major northern European importers the UK, Germany and Poland have received more than 80pc of their diesel and gasoil on tankers with capacity of around 40,000t or less since February, even though roughly 50pc of the diesel and gasoil arriving in the EU and UK altogether has completed at least most of its journey on an LR2. Some LR2 cargoes entering the EU and UK are transferred to smaller tankers at sea, but comparatively high costs keep this to a small minority of the total.
Of the rest, well over a third discharges at ARA. This is primarily for re-export; ARA exports far more of these products than it imports.
