Swing-Supplier Deficit Raises Med Diesel Prices From Two-Month Lows

Premiums paid for diesel delivered to Mediterranean ports rebounded strongly this week to raise prices from two-month lows, amid an immediate shortfall of cargoes arriving this month from swing suppliers Saudi Arabia and India.

The price for ultra-low sulfur diesel Mediterranean cargoes was today assessed at a $1.50 premium to the August low-sulfur gasoil future, giving a price of $425.50 per ton. That's in sharp contrast to diesel cargo prices in northwest Europe, which fell to a discount over the front-month gasoil future for the first time since mid-March. Barge prices are also pricing at the steepest discount since Feb. 16.

Diesel Med prices have gained from $416 per ton on July 8, the lowest since May 12, OPIS data show, and are $6.50 per ton higher than the FOB price in northwest Europe.

Brokers signaled fewer than anticipated shipments arriving in the Med from countries east of the Suez Canal for the gain, alongside thinner trade volumes from the U.S., the second-largest supplier of diesel to Europe after Russia.

Although there are 11 cargoes totaling 940,000 tons that loaded at ports at India and Saudi Arabia that may arrive in northwest Europe or the Mediterranean over July, some four have already discharged in Europe. Only two of the remaining cargoes are signaling they will stop in the Mediterranean. A further four vessels are chartered with options and therefore may not end up sailing west of the Suez.

Exports from the U.S., which together with Russia supplied the 28 member countries with 70% of the 45 million tons in ULSD exports in 2015, are also thin in the Med, brokers told OPIS. However five cargoes with 263,000 tons from the U.S. are seen heading for Italian ports over the next three weeks, suggesting that demand is higher than anticipated, possibly because of a refinery outage or to replace cargoes sent to French refineries during last month's strike that shut down production there.

U.S. diesel exports to Europe are tracked at 1.3 million tons this month, while overall volumes are so far at 3.7 million tons.

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