Four Europe Reverse-Arb Diesel Cargoes Make Trans-Atlantic Voyage

Four ships are tracked shipping diesel across the Atlantic from northwest Europe or Baltic ports for oil traders BP Shell and Trafigura, amid draws of the middle distillate in independent storage in the Amsterdam-Rotterdam-Antwerp region.

BP chartered two ships (Bright Fortune and Mercer Street) to each load 40,000 metric tons of ultra-low-sulfur diesel around Sept. 6 from northwest Europe for shipment to the U.S., according to the OPIS Tanker Tracker.

Trafigura is shipping a cargo to Argentina from the Russian Baltic port of Primorsk on the Navig8 Andesine, while Shell has the High Efficiency arriving in Santos, Brazil, in two weeks, after loading at Rotterdam, based on information compiled from brokers. The Trafigura cargo is scheduled to arrive at Campana in 12 days' time.

Similar trans-Atlantic voyages were last seen in June, when tracking data showed traders shipped ULSD on a handful tankers to the U.S. East Coast and Argentina. It's rarely profitable to buy ULSD in Europe for shipment and sale across the Atlantic. However, the front-month ULSD future in Europe is trading about $37/t lower than the NYMEX heating oil contract at around 14:13 London time, while freight costs are around $11 per ton.

The shipments are seen as diesel imports to Europe from main suppliers of Russia, the U.S., and Middle East Gulf and are seen compensating for additional demand amid planned autumn refinery maintenance.

More volumes will be diverted to Europe because of a saturated Asian market and higher runs from three Middle East export refineries, BNP Paribas said in a report on the global diesel sector earlier this month.

Some 4.1 million tons on 99 tankers is tracked arriving in Europe this month, including 1.3 million tons from the U.S. Gulf Coast and 1.3 million tons from Russia, according to the OPIS Tanker Tracker.

Some 490,000 tons is seen arriving from Saudi Arabia in August, and 330,000 tons so far in September, data compiled from traders, brokers and satellite-tracking data shows.

Distillate inventories in the ARA region for the week ending Aug. 28 were 2.2% lower than a month ago, at 23.6 million bbl, BNP Paribas said in a report, citing data from PJK International.

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