Larger vessels carrying 10 ppm diesel from the US Gulf Coast to Europe are unable to fill shorts into smaller Mediterranean ports, tightening up the market in the region amid a lack of sufficient local production.
According to S&P Global Platts trade flow software cFlow, there are currently around 16 cargoes on water heading from the US Gulf Coast to Europe and the Mediterranean, with only five of those headed into the Mediterranean.
Within the first week of July four Long-Range tankers left the US Gulf to take distillates into Europe in the month, from only two arriving in the whole of June and three in May, according to cFlow.
As a result, the comparatively strong Mediterranean market is failing to attract more vessels as larger vessels used on the route can have difficulty finding homes in more restrictive Mediterranean ports.
Overall, there have been fewer volumes into Europe and the Mediterranean this year as Latin America pulls more lower sulfur product.
The market is already tight market as refiners in the Mediterranean are not producing enough 10ppm product to keep the market balanced, sources said, maximizing jet fuel production as peak demand season comes into full swing.
“It’s quite tight in the Med for diesel, there aren’t many Med-origin barrels around for the second half of July,” one source said.
However, jet fuel demand has been weaker than expected recently as demand fails to reach anticipated levels, causing jet fuel cracks to underperform compared to diesel.
Meanwhile, the arbitrage for diesel from the Arab Gulf and India has been shut due to a high positive EFS, a measure of strength in Singapore distillates compared to European distillates, attracting arbitrage barrels East rather than into the Mediterranean.
Although plenty of term barrels are still making their way into the Mediterranean, the lack of arbitrage barrels has contributed to the overall lack of availability and left market participants competing over the smaller number of imports from the US.
Source: PlattsPrevious Next
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