ARA diesel arrivals very slow in August

The northwest Europe trading hub of Amsterdam-Rotterdam-Antwerp (ARA) has received exceptionally little diesel and gasoil so far in August, starting to realise traders' predictions of low supply this month.

ARA received only one Handysize tanker of gasoil in the first six days of August, according to Vortexa. There were no larger cargoes and only a smattering of smaller ones, for a total of around 75,000t of gasoil including low-sulphur diesel. This equates to just 13,000 t/d, compared with 54,000 t/d or 1.65mn t/month in the first seven months of this year.

Only a further 520,000t are signalling arrival at ARA in August. Nearly half of that is on two tankers from Ruwais, UAE, where Adnoc runs an 817,000 b/d refining complex. The Long Range 2 (LR2) SKS Donggang is scheduled to arrive on 11 August and the very large crude carrier (VLCC) Front Tyne on 15 August. Tankers of the latter class usually only carry fuels like diesel on their maiden voyage, if at all, but the Front Tyne has carried several diesel cargoes from Ruwais since the refinery was commissioned earlier this year.

Two Medium Range (MR) tankers are on their way with diesel from the US Gulf coast - the Easterly Jupiter from Marathon's 593,000 b/d Galveston Bay refinery and the STI Queens from Citgo's 418,000 b/d Lake Charles plant - and are scheduled to reach ARA on 12 and 16 August, respectively. More cargoes may yet reveal ARA as their destination.

The Handysize tanker that arrived in ARA was the Zeze Start that loaded in Dortyol, southeast Turkey. The Handysize Maersk Kate is on its way from the same port and will arrive on 10 August. There is no refining capacity at Dortyol, which also receives seaborne diesel and gasoil. This year, 80pc of the 900,000t arriving at Dortyol by sea has been from Russia.

Traders said Europe is likely to receive scarce resupply in August as economics have turned against east and west trade routes. Buyers said they have struggled to find sellers and sellers said they have little to offer. Even if more supply were to become available now from the US or east of Suez, it would only begin to arrive in Europe around the end of August or in September.

European diesel values have rallied as a result. Premiums to North Sea Dated crude at ARA averaged $35.73/bl last week, the highest of any week since January, before the EU banned Russian products.

Front-month European Ice gasoil futures averaged a $24.36/t premium against front-month Singapore gasoil swaps, the highest since late June. But that suggests arbitrage economics on the east-west route are poorer than earlier in the year - Ice gasoil averaged a $31.15/t premium against Singapore in the first two months of the EU's ban on Russian product.

Further obstructing resupply, naphtha movement from Europe to Asia-Pacific has removed LR2 tankers from the diesel trade. This pushed up freight costs from the Mideast Gulf to northwest Europe to average more than $40/t last week, for the first time since early June.

Diesel arrivals in Europe may remain scarce beyond this month, with market participants noting heavy refinery maintenance schedules are expected in the Middle East and India between September and November.

European refiners will be conducting their own seasonal work in those months. Two of Germany's largest refineries will conduct partial maintenance - BP's 265,000 b/d Gelsenkirchen site and Miro's 299,000 b/d Karlsruhe. Galp's 226,000 b/d Sines refinery in Portugal will undergo work on a crude unit and a fluid catalytic cracker (FCC) in the fourth quarter.

By Benedict George

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