Tightening European Diesel Market yet to Stimulate MR Demand

A series of refinery outages in the Atlantic Basin and anticipated seasonal maintenance have sharply tightened regional gasoil balances and have sent European diesel prices soaring. Typically, this would open up the trans-Atlantic arbitrage and encourage US Gulf diesel cargoes into Northwest Europe or the Med, stimulating MR demand. Unfortunately, the explosion and fire at Venezuela’s 645 kbpd Amuay refinery, temporary USG refinery closures from Hurricane Isaac and the August fire at Chevron’s Richmond refinery have all combined to remove supply and push diesel prices higher in the USG. With a closed arb and plentiful tonnage, MR freight rates on the Baltic TC14 route for 38 USG-UKC have languished. As Europe heads into its Autumn refinery maintenance season and as supplies come back on line in the USG, an reopening arb should stimulate activity. Download here