U.S.-Europe Diesel Export Surge Seen as Arb Opens

The number of tankers chartered to ship diesel from U.S. Gulf refineries for Europe has swelled this week, with 764,000 tons (about 5.7 million bbl) on 17 ships now seen loading in the seven-day period until the end of September.

That compares to the 27 tankers that loaded 1.1 million tons of ULSD from ports in the U.S. Gulf throughout the Sept. 1-22 period that are reportedly destined for Europe, according to the OPIS Tanker Tracker.

The surge may be related to a reopening arbitrage, with indicative figures showing it's been profitable two out of the three days this week to buy ULSD in the U.S. Gulf and ship it to Europe for sale at a profit. Such positive numbers haven't been seen since OPIS began compiling indicative figures (adding spot freight costs to the U.S. Gulf FOB price and subtracting from the assessed Europe delivered price) since mid-July.

The U.S. is the second-biggest supplier of ULSD to Europe after Russia, but is competing with new refineries in the Middle East for market share. Russia is tracked shipping just under 1.28 million tons to Europe in September, excluding 364,000 tons that departed from nearby Latvian Baltic ports. September imports from the U.S. are at just over 1 million tons.

American cargoes tracked so far that are due to arrive in Europe in October tally just over 1.3 million tons, already surpassing the prior month and suggesting that positive arbitrage figures may be leading the surge.

Europe's 28 member countries imported 37 million tons of ULSD in 2014, of which about 13.3 million tons came from the U.S., show data from Eurostat, the European Commission's statistics agency.

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