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Written by Shariq Khan and Laura Sanicola
NEW YORK/WASHINGTON (Reuters) – Weak U.S. refining activity and disruptions to global trade have tightened diesel supplies in recent weeks, slowing U.S. diesel exports to Europe from a record high this month. There is.
Difficulties in securing U.S.-produced diesel are further complicating supply shortages in Europe, which has traditionally relied on Russian fuel exports. U.S. diesel fuel prices soared to a four-month high at one point this month, above $48 a barrel, narrowing arbitrage opportunities to ship fuel to Europe.
Many of Europe’s other Middle Eastern and Asian suppliers have been forced to bypass the Cape of Good Hope due to Houthi attacks on ships in the Red Sea, further lengthening delays and reducing the profitability of trade. ing.
European diesel imports from the United States fell by almost half this month to 6.65 million barrels from January’s 11.44 million barrels, the highest level since August 2017, according to an analysis by ship tracking company Kpler.
“European diesel appears to be the key product at risk due to route changes, supply availability and arb distortions,” Macquarie analysts said in a note this month.
The drop in trade comes as the 435,000 barrel-per-day BP Whiting refinery in Indiana, a major U.S. diesel producer, was forced to shut down in early February after a power outage.
The outage coincided with operational issues at several plants during the mid-January cold snap, including Total Energy’s 238,000 barrels per day Port Arthur refinery in Texas. Other plants are undergoing planned upgrades, including Motiva Enterprises’ 626,000 barrel-per-day plant in Port Arthur.
U.S. refinery capacity utilization fell to 80.6% this month from nearly 93% at the start of the year, the lowest level since December 2022, according to government data.
As a result, U.S. refiners’ distillate production fell to 4 million barrels per day in the week ending February 9, also the lowest level since December 2022. U.S. distillate inventories have declined for the fifth straight week and are now 10% below the previous five weeks. The data showed that this is the annual seasonal average.
Diesel prices in northwest Europe rose steadily throughout February, averaging over $118 per barrel (compared to $109 last February).
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Kpler analyst Matt Smith said European diesel prices are expected to rise further as European refineries plan their own rebuilds in March and April, leading to more U.S. production in Europe. He said it has the potential to revitalize the flow of diesel.
Meanwhile, diesel prices in the country have fallen nearly 30% from recent highs to $34 a barrel on expectations that U.S. refineries will restart soon.
Research firm IIR Energy said Friday it expects U.S. refiners to increase available refining capacity by 431,000 barrels per day in the week ending February 23, cutting offline capacity to 1.8 million barrels per day. announced.
Fall in US diesel prices followed by rise in European diesel prices represented by HOGO swaps [HO-LGO1=R]Sparta Commodities analyst James Noel Beswick said the company has resumed arbitraging U.S. diesel from the Gulf Coast to Europe for March and April arrivals.
Noel Beswick noted that arbitrage from the U.S. Atlantic coast could also occur in the coming months.
At least three ships carrying more than 850,000 barrels of diesel from the U.S. Atlantic coast are scheduled to unload at various European ports next month, according to Sparta and Kupler shipping data.
Two cargoes totaling more than 1 million barrels have been secured from the U.S. Gulf Coast for April delivery, according to Kpler data.
(Reporting by Shariq Khan in New York and Laura Sanicola in Washington; Editing by Liz Hampton and Josie Kao)
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