Surge in Middle East Diesel Shipments Heading for Europe

Long-anticipated new sources of ultra-low sulfur diesel to Europe from the Middle East are starting to influence the market, with six cargoes totalling 420,000 metric tons currently tracked on the water and due to arrive at ports on the continent within the next four weeks.

Saudi Arabia supplied the 28-member bloc with barely 500,000 tons of the 37.1 million tons of ULSD imported last year as two new refineries in the kingdom capable of producing European-spec diesel slowly reached full operations in 2014.

But tanker-tracking data and European Commission trade figures now reveal that exports of ULSD, particularly from Saudi Arabia, are now more regular, and have now exceeded at least two or three cargoes monthly since May.

Of the six tankers on the water and tracked to arrive in Europe over September and into early October, four are from the SATORP 400,000 b/d refinery, one is from the 400,000 b/d Red Sea refinery of YASREF, while another is from the upgraded and expanded Ruwais refinery in the UAE.

First half imports of ULSD from Saudi Arabia reached 1.2 million tons, more than double the entire volumes imported the prior year, data from Eurostat, the European Commission's statistics agency show.

That included a massive 640,000 tons in the month of May alone, when both the 400,000 b/d SATORP and 400,000 b/d YASREF were reporting they were fully operational and the Kingdom's gasoil and diesel exports hit a monthly record.

Higher-than-expected shipments are already expected this month from the U.S., as refineries maintenance in Russia, Europe's largest supplier of ULSD, curb diesel exports from the federation. U.S. volumes are tracked arriving in September at just over 1 million tons on 25 tankers.

Russia and the U.S. supplied Europe with about 85% of its imported diesel last year, with rising shipments from the Middle East expected to exercise influence over delivered prices, amid fears that a global oversupply the middle distillate will curb premiums.

Ships tracked include: Anatoly Kolodkin (BP, 90kt) arriving Le Havre Sept. 10; Politsa Lady (BP, 40kt); Torm Ingeborg (Total, 80kt) in Europe around Sept. 30; Ginny (60kt, Total); Sea Legend (90kt, Total); Gulf Coral (60kt, Total). Total owns a minority interest in the SATORP refinery with partner, Saudi Aramco.

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