US Gulf Coast to Help Supply Record Mediterranean Diesel Imports

(Bloomberg) -- Refiners on the US Gulf Coast are set to send increasing amounts of diesel to Europe, a burgeoning trade that could last through summer, according to an analysis by Vortexa.

Higher power-generation demand in the Mediterranean is expected to drive the gains, which already boosted freight rates 40% in the week ended June 16, Vortexa said. 

“Record import demand in the Mediterranean could increase Europe’s overall need for additional external barrels,” Vortexa analysts led by Samantha Hartke wrote in a report Thursday. 

Refiners across the US are exporting 1.65 million barrels a day of distillates including diesel, the highest seasonally since 2019, according to Energy Information Administration data. Domestic diesel consumption that’s at the lowest seasonal level since 2020 has helped make more of the fuel available for export. Still, distillates markets in the US are tight, with nationwide inventories inventories for the fuel sitting at a 25-year seasonal low.

The cross-Atlantic trade route for diesel is being closely watched after arbitrage opportunities for traders opened up in response to the Iran-Israel conflict and subsequent US air strikes that raised concerns about supply disruptions, especially in the shipping bottleneck of the Strait of Hormuz, according to an analysis by Sparta Commodities. After the June 24 ceasefire announcement, those arbitrage opportunities have largely closed, partly driven by rising freight costs.

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