Europe’s combined imports of diesel/gasoil and jet/kero fell in January by 32% year-on-year, falling below the seven-year range. This decline fits with seasonally low European demand for refined products at the start of 2024 and a surplus of barrels having arrived at the end of 2024. 

Supply-side surplus began from the surge in imports arriving from East of Suez in October-24. Further pressure came from ample transatlantic diesel barrels due to an oversupplied US market, which resulted in Northwest European diesel imports from PADD 3 reaching a multiyear high in December.

Since November 2024, clean product exports from India have pivoted away from West of Suez destinations, particularly Europe, towards East of Suez destinations in Southeast Asia, Oceania, and East and South Africa. Momentum for increasing eastbound motor fuels exports strengthened during the pre-Lunar New Year demand surge, driving tightness in EoS market, which offered more favourable product prices for India WC and Red Sea refiners (Argus). 

Declining westbound middle distillate flows from the Saudi Red Sea were further exacerbated by supply constraints. Middle distillate exports from the region plummeted by nearly 50% month-on-month in November-24,  the lowest levels observed since 2021, due to maintenance turnaround at Yanbu Refinery (400kbd capacity) and Jizan Refinery (400kbd). Meanwhile, exports from the Wider Arabian Sea towards Northwest Europe and the Med also dropped to data set lows during the same months.

LR tonne-miles on selected E-W routes dropped by 91% from November 2024 (bn tonne-miles)

The reorientation of Wider Arabian Sea middle distillate trade from the West to East has exerted significant pressure on LR tonne-miles. The average voyage distance to the Pacific Basin destinations is around 70% lower than voyages to the Atlantic. The latter route is extended especially since October 2023 due to transits via the Cape of Good Hope, rather than via Suez Canal, due to Red Sea attacks.

Additionally, the rising volume of middle distillate cargoes moving eastward from India WC increased by 7% between November-24 and January-25. Shorter voyage distances have clearly weighed on the freight market, resulting in a steep drop in tonne-miles for LRs facilitating this trade.

Looking forward, unless European middle distillate demand picks up again, we can expect to see continued downward pressure on global LR tonne-miles. Although the restart of Saudi Arabia’s Yanbu Refinery (400kbd capacity) and Jizan Refinery (400kbd capacity) will likely restore some middle distillate flows to the West of Suez, they are likely to be short-haul and heading towards the Mediterranean. Further pressure on LR tonne-miles could come from shortening WArS-to-EoS voyage distances with the possible reopening of Red Sea transits via the Bab-el-Mandeb, though any evidence of vessels willing to make the first move has yet to be observed.