Diesel markets continue to remain oversupplied
We take a look at demand slowdown and bearish margins weighing in on oversupplied diesel markets
Global diesel markets have remained well supplied due to diesel cracks being on a relative high since late 2022 and new refinery start ups in the East of Suez markets. At present we observed a slowdown in the Atlantic Basin imports, while exports are ramping up in the Pacific Basin. We explore these markets and underlying factors such as economic slowdown, margins and competition from other suppliers in this insight piece.
Atlantic Basin diesel/gasoil imports fall
Atlantic Basin diesel/gasoil imports fell by 190kbd in May after making a strong recovery in April, shaking off the slowdown of over the previous two quarters. Even though these flows have come off from the highs seen in April, they still remain well above the historical range. The key drivers are the flows from Russia, which hold up despite drone attacks on their refineries, and East of Suez suppliers which continue to send diesel into the Atlantic Basin. As a result, markets in the Atlantic Basin have been saturated with supply and have imported less diesel during May, especially Europe which is mainly driving this slowdown in May. This oversupply and stiff competition from other suppliers mentioned above have also led to US Gulf Coast margins to come under pressure.
Saturated Europe imports less, with the exception of Spain
European (excl. Turkey) diesel/gasoil imports by destination shipping region (mbd, LHS) vs share to Spain (%, RHS)
Focussing on Europe (excl. Turkey), we observed a certain slowdown in imports, with demand dropping in France and the Baltic countries due to lower consumption, which might point towards slowing economic activity in the region (Argus). The bright spot is Spain which accounted for a 12% share of all the European diesel imports – reaching its highest share in over two years. For the month of May, Spain’s imports increased 57% vs April reaching 290kbd. This increase is driven by planned maintenance at the 220kbd Bilbao refinery, also leading to increased imports into Bilbao.
East of Suez supplies ramp up post refinery maintenance
Select East of Suez (EoS) suppliers have continued to push diesel barrels into the markets as they come out of refinery maintenance season. But Northeast Asian suppliers face bearish margins as they ramp up at a time closed export arbs keeping their products within the region. We have discussed these factors in detail earlier this week in our insight piece titled “Northeast Asia’s refineries face uncertainties with ramp ups post turnaround.” Overall, diesel exports from key EoS suppliers – India, China, Singapore and the Middle East Gulf (MEG) have increased in May. Exports from MEG have reached their highest levels since 2022 post the full start-up of new refineries in the region but are facing competition from Russian barrels in the South Atlantic. Supplies from other key origins have largely remained EoS with some Indian diesel volumes diverting away from Europe towards Africa.
