Indian diesel armada heads toward Europe as Asia proves glutted
The rise in volumes from India is disadvantaging sellers in Northeast Asia, who were trying to send diesel cargoes to Europe earlier this month but may now not be successful, according to Facts Global Energy.Updated: Dec 26, 2018 09:12 IST
A diesel glut in Asia is encouraging traders of the fuel to ramp up cargoes from India to Europe, where stockpiles were ravaged by refinery halts and unusual weather earlier this year.
Around 577,000 tons of the fuel already arrived this month or are en route to Europe from India’s refineries -- whose supplies get sent east or west depending on which market is best -- according to shipping and port-loading information compiled by Bloomberg. The cargoes will arrive this month and next, implying about a doubling in the normal flow rate.
Unexpected halts at a batch of refineries, particularly in Germany, caused the diesel market in Europe’s Amsterdam-Rotterdam-Antwerp trading hub to surge in the past several months as stockpiles dwindled. For some consumers, the pain was compounded by a drought that dried up the river Rhine, preventing barges from delivering the fuel.
“There is an amount of resupply that needs to be done in Europe,” said Olivier Jakob, an analyst at Petromatrix GmbH based near Zug, Switzerland. “It was difficult to bring big cargoes into ARA” because the forward price curve made such imports unattractive and low water levels on the Rhine meant fuel couldn’t be moved to inland consumers.
Europe’s diesel pull comes at a time of oversupply in East Asia, exacerbated by increased Chinese fuel exports that traders anticipate persisting into next year. The country raised its total fuel-export quotas by 12 percent for 2018, encouraging its refiners to produce diesel and gasoline for sale overseas. Singapore’s diesel market has also been weighed down by a pile-up in vessels storing, with at least 13 diesel-laden ships floating off the coast of Taiwan earlier this month, according to a report by Energy Aspects Ltd.
The rise in volumes from India is disadvantaging sellers in Northeast Asia, who were trying to send diesel cargoes to Europe earlier this month but may now not be successful, according to Facts Global Energy. Meanwhile, the so-called East-West spread denoting the attractiveness of moving fuel between regions has narrowed as Indian cargoes exited the Asian region, data from PVM Oil Associates show.
“As India supplies more, cargoes from Far East Asia will be more disadvantaged due to longer distance,” said Weng Inn Chin, an analyst at industry consultant FGE in Singapore. “Concerns seem to be resurfacing about Rhine water levels and the ARA stocks built suddenly last week. There is also the issue with rising freight costs now, so arbitrage flows are somewhat disadvantaged.”
There’s also doubt about whether all the vessels from India will end up in Europe. America’s distillate stocks are at their lowest seasonally since 2013. With the U.S. market recently strong, some cargoes could go there instead, Jakob said.
First Published: Dec 26, 2018 09:10 IST