Europe Turns to M. East, U.S. for Russian Diesel Shortfall

SECAUCUS, NJ (DTN) – Europe should cover diesel deficits caused this quarter by lower Russian exports with supplies from Middle East and U.S. PADD 3, as the market is expected to tighten too driven by higher seasonal demand, energy and freight intelligence service Vortexa said Friday (10/3).

“Refinery turnarounds in Europe and the Middle East are set to peak in October, with products supplied by these refineries likely returning to the market in the second half of Q4,” Vortexa’s market analyst Mick Strautmann said in a report.

“This will likely ease prompt tightness currently keeping European diesel cracks elevated y-o-y, and further alleviate concerns of any tightness going into January’s import ban.”

The ban imposed by the European Union on Russia-derived products adds uncertainty about supplies from India and Turkey to Europe. But even under strict enforcement, alternative supplies from the Middle East Gulf and PADD 3 should largely cover the deficit, according to the report.

Strautmann noted that Russian diesel and gasoil exports were tracking below seasonal averages, hitting  2017 lows in September.

This came at a time when Northwest Europe and U.S. PADD  markets typically saw import demand rise by about 10% and 25% quarter-on-quarter, respectively, requiring immediate restocking.

With fewer inflows, Turkey’s diesel/gasoil exports to Europe have dropped by 50% month-on-month in September and are likely to stay pressured while Russia supply is tight.

The return of refinery products after the peak October maintenance period is also expected to ease any market prompt tightness by late Q4, alleviating concerns ahead of the January ban on Russian oil.