European diesel
Overview
As the most consumed refined product in Europe, diesel is a fundamental source of road fuel. But without sufficient local refining capacity to cover demand, the region is dependent on imports of this critical product.
Since halting imports from Russia in February 2023, trade flows have transformed. Diesel is being imported from further afield into large ports and is then redistributed to the rest of the region, creating an export flow from the ARA hubs.
The market has transformed. Only Argus diesel prices reflect this new reality.
New price benchmarks for European diesel
Understand how the European diesel market has changed and why new price benchmarks are important.
Key prices
Argus provides independent price solutions for the new diesel trade flows in Europe
Argus diesel LR2 cif ARA captures the value of long-range 2 (LR2) diesel cargoes 90,000-100,000 tonnes of restricted origin. These cargoes from the Middle East and Asia represented over 45% of diesel imports in 2023. Argus diesel LR2 prices provide a benchmark to these volumes and bring trusted transparency to the prices of distillate flows into Europe.
Argus diesel fob ARA 30kt captures the value of 30,000 tonne cargoes on Handysize vessels leaving the northwest European hub to supply the rest of the region. This activity has increased dramatically since 2022 as LR2 cargoes are broken down to be redistributed to smaller ports and with increased loadings from local refineries. The Argus price is the first to capture this new and increasing liquidity.
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European diesel markets in 2023
Join us for this special webinar, as our team delve into the story of European diesel stocks, changing trade flows and what's happened with prices so far this year.
WebinarsUpheaval for European diesel markets in 2023
Traditionally, 50-60pc of Europe’s diesel imports came from Russia as part of term supply contracts but since the regulatory ban, this is no longer an option. Instead, alternative flows are growing in importance to address the shortage of diesel in the European market. View the forecast from our consulting team for supply and demand balances for each region.
FAQsArgus pricing solutions for non-Russian diesel cargoes coming into Europe
The European diesel market is going through one of the largest changes seen in recent years, with market participants seeking to avoid and diversify away from Russian-origin oil.
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Latest European diesel news
European refineries suffer from under-investment
European refineries suffer from under-investment
European refiners are shutting capacity again, but tight diesel supply could give them a last hurrah, writes Benedict George London, 5 January (Argus) — Falling demand for fuels has been dissuading many European refiners from investing in their plants, with the result that assets are deteriorating and some closing altogether. But extraordinary margins are still achievable in the short term for those that can stay on line. Argus reported 14 separate incidents in which a European refining unit had to close because of a fire, leak, power outage or other accident in 2023 — up from 12 in 2022. Under-investment has been exacerbated by circumstances. European costs are uncompetitive against those in the Middle East or Asia. European oil demand is declining, but growing in those other regions. Ageing units have been undermaintained since 2020 because of the pandemic and then a reluctance to miss out on resurgent margins by halting units for upkeep. A prolonged heatwave last summer added further mechanical stress. The EU ban on Russian crude has pushed some units to run lighter slates than they were designed for. The inevitable result of long-term under-investment and underperformance is permanent closure. This trend has been evident for decades and came to the fore again late last year, after extraordinary margins for most of 2022 and 2023 led to a pause. UK-Chinese joint venture Petroineos announced in November that it is beginning the process of converting the 150,000 b/d Grangemouth refinery in Scotland into an import terminal — work it expects to complete in 2025. "Refinery margins are forecast to normalise over the medium term, resulting in a reversion to loss-making for our business," Petroineos told Argus . Six European refineries have closed since 2020. Grangemouth will bring that to seven and Shell's 147,000 b/d Wesseling refinery in western Germany will make it eight if they both close in 2025. These closures will bring a 935,000 b/d capacity loss. Italian refineries look most vulnerable. Eni told workers as long ago as 2021 that its 84,000 b/d Livorno facility would stop refining crude by 2022, to focus on base oils and biofuels. This has not happened yet, perhaps because conventional refining margins have been so high. Oil traders said the Eni-KPC 241,000 b/d Milazzo refinery in Sicily is comparatively unprofitable too. Major retreat The majors also keep edging away from European refining through divestments. TotalEnergies, Shell and ExxonMobil have exited eight European refining assets between them since 2020. Most recently, ExxonMobil sold its 25pc stake in southern Germany's Miro refinery in October 2023, and Shell its 37.5pc stake in Germany's Schwedt to UK-based Prax. In the shorter term, European refiners are likely to keep reaping profits that are extraordinary by historical standards. Falling regional capacity and frequent outages are buoying the margins of those that manage to stay on line. Without political rapprochement with Russia, diesel supply lines will remain long and unreliable, keeping margins high in Europe. The forecast recovery of European economic growth in 2024 could add demand and push margins still higher. TotalEnergies chief executive Patrick Pouyanne noted that the firm's refineries are already "running to make diesel" because the loss of Russian supply has kept diesel margins elevated despite weak demand. If production cannot rise to match a demand recovery, margins respond more strongly. But if planned refining capacity opens in other regions, European plants might face stiffer competition. Oman's 230,000 b/d Duqm and Nigeria's 650,000 b/d Dangote refinery could start up fully in 2024, while Kuwait's 615,000 b/d al-Zour refinery could begin shipping diesel west too. But the only seemingly reliable thing about new refinery start-ups is that they do not happen on schedule. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Viewpoint: European refineries suffer underinvestment
Viewpoint: European refineries suffer underinvestment
London, 29 December (Argus) — Falling demand for fuels has been dissuading many European refiners from investing in their plants, with the result that assets are deteriorating and some closing altogether. But extraordinary margins are still achievable in the short term for those that can stay online. Argus reported 14 separate incidents in which a European refining unit had to close because of a fire, leak, power outage or other accident in 2023 — up from 12 in 2022. Underinvestment has been exacerbated by circumstances. European costs are uncompetitive against those in the Middle East or Asia. European oil demand is declining, but growing in those other regions. Ageing units have been undermaintained since 2020 because of the Covid-19 pandemic and then a reluctance to miss out on resurgent margins by halting units for upkeep. A prolonged heatwave in summer 2023 added further mechanical stress. The EU's ban on Russian crude has pushed some units to run lighter slates than for which they were designed. The inevitable conclusion of long-term underinvestment and underperformance is permanent closure. This trend has been seen for decades and resumed in late 2023, after extraordinary margins for most of 2022 and 2023 led to a pause. UK-Chinese joint venture Petroineos announced in November that it is beginning the process of converting the 150,000 b/d Grangemouth refinery in Scotland into an import terminal in 2025. "Refinery margins are forecast to normalise over the medium term, resulting in a reversion to loss-making for our business," Petroineos told Argus . Six European refineries have closed since 2020. Grangemouth will increase that to seven and Shell's 147,000 b/d Wesseling refinery in western Germany will make it eight if they both close in 2025. Those eight mean a total loss of 935,000 b/d of capacity. Italian retreat Italian refineries look most vulnerable. Eni told workers as long ago as 2021 that its 84,000 b/d Livorno refinery would stop refining crude by 2022, to focus on base oils and biofuels. It has not happened yet, perhaps because conventional refining margins have been so unexpectedly high. Oil traders said the Eni-KPC 241,000 b/d Milazzo refinery in Sicily is comparatively unprofitable too. The majors keep edging away from European refining through divestments too. TotalEnergies, Shell and ExxonMobil have exited eight European refining assets between them since 2020. Most recently, ExxonMobil sold its 25pc stake in the southern German Miro refinery in October 2023, and Shell its 37.5pc stake in Germany's Schwedt to UK-based Prax. In the shorter term, European refiners are likely to keep reaping extraordinary profits by historic standards. Falling regional capacity and frequent outages are helping the margins of those who manage to stay online. "If we have outages, then, all of a sudden, [refined product] prices start to increase," BP interim chief executive Murray Auchincloss said on the company's third quarter earnings call. Without political rapprochement with Russia, diesel supply lines will remain long and unreliable, keeping margins high in Europe. The forecast recovery of European gross domestic product (GDP) growth in 2024 could add demand and push margins still higher. TotalEnergies' chief executive Patrick Pouyanne noted its refineries are already "running to make diesel" because the loss of Russian supply has kept diesel margins at historic highs despite weak demand. If production does not have room to rise to match a demand recovery, margins respond more strongly. But if new refining capacity opens in other regions as planned, European refiners may face stiffer competition, hurting their margins and vindicating plans to close units. The key examples are Oman's 230,000 b/d Duqm and Nigeria's 650,000 b/d Dangote refinery, which could start up fully in 2024. Kuwait's 615,000 b/d Al-Zour refinery could avoid mishaps and begin shipping diesel west as expected too. But the only thing seemingly reliable about new refinery openings is that they will not happen on schedule. By Benedict George Send comments and request more information at feedback@argusmedia.com Copyright © 2023. Argus Media group . All rights reserved.
Repsol restarts Coruna CDU, Bilbao CDU offline
Repsol restarts Coruna CDU, Bilbao CDU offline
Madrid, 27 July (Argus) — Spain's integrated Repsol has restarted a crude distillation unit (CDU) at its 120,000 b/d Coruna refinery in northwest Spain after nearly three months offline, while a larger CDU along the coast in Bilbao was taken offline on 26 July. The affected unit in Bilbao is the larger of the two CDUs Repsol operates at the 220,000 b/d Petronor refinery near the city and has nameplate capacity of about 130,000 b/d. It was shut on 26 July when a fire broke out in the vicinity of the unit and was quickly extinguished. A source with knowledge of the situation at the refinery in Bilbao said they expect the unit to be shut for "days". The larger of the two CDUs at Coruna that has recently restarted had been offline since a fire broke out at the unit on 20 April when the refinery was completing planned maintenance on its hydrotreatment and coking units. It was offline until July and deliveries to the refinery were sharply lower in May and June, according to Argus Tracking . By Jonathan Gleave Send comments and request more information at feedback@argusmedia.com Copyright © 2023. Argus Media group . All rights reserved.
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