Europe-Bound Diesel Tanker Diverts on Saudi Cargoes Influx and Price Fall

The Europe-bound Loukas I has diverted mid-Atlantic, taking its 38,000-ton cargo of diesel to South America, amid plunging prices and a glut of the middle distillate seen arriving this month in the Amsterdam-Rotterdam-Antwerp region from competitor suppliers in Saudi Arabia.

The tanker loaded at Marathon's Garyville refinery dock early in July, then departed, and was signalling it would be arriving around the Gibraltar region around two weeks later, according to the OPIS Tanker Tracker.

But on July 13, the ship changed course and is now heading south and for the Atlantic port of Cristobal, where it's expected to make a Panama Canal transit, reflecting how volatile conditions for middle distillates are rapidly shaping trade flows.

Europe imported nearly 45 million tons of ultra-low-sulfur diesel in 2015, and has the world's biggest regional deficit. But this month, two Europe-bound cargoes from the U.S. Gulf have diverted, while a third one considered an alternate as prices over the month have so far fallen 8%.

Delivered ULSD cargoes in northwest Europe have so far averaged $417 per ton this month, down from June's average of $446 per ton, with prices falling at a faster pace than in the U.S. Gulf. There, refined spot prices for Gulf Coast ultra-low-sulfur No. 2 averaged $1.45/gallon in June, with the July average at $1.38, or $432.88 per ton.

Some 760,000 tons on nine tankers is tracked being loaded from Saudi Arabia to make the month-long voyage to northwest Europe that will arrive in July, according to data from brokers, traders and ship satellite-tracking data. Of the nine vessels, two have options that may see them discharge their cargo at a destination east of the Suez Canal, and may not make the voyage west.

That would be the second-highest monthly volumes since February, when more than 800,000 tons was imported, according to data from Eurostat, the European Commission's statistics agency.

Overall volumes of diesel tracked to Europe in July now stand at just over 4 million tons on 100 vessels, with 1.3 million tons from Russia, and 1.2 million tons from the U.S., according to the OPIS Tanker Tracker.

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