Sharp rise in gasoil moving east to west

The volume of diesel and other gasoil arriving in Europe from east of Suez has shot up this month, reflecting resilient demand in the face of extended and tightened lockdown measures across large parts of the continent.

A total of 1.21mn t has arrived in Europe from the Middle East and Asia-Pacific in April so far, compared with just under 860,000t in the whole of March, according to Vortexa data, with this month's imports from Saudi Arabia and India already exceeding last month's.

Almost all of April's arrivals loaded in March, while cargoes arriving last month loaded in February. One factor supporting this month's higher arrivals is the disruption to shipping traffic in late March when a container ship ran aground in the Suez Canal. Meanwhile, the rapid rise in March loadings compared with February partly reflects strengthening diesel prices in Europe relative to those in Asia. Front-month Ice gasoil futures averaged a $2.22/t premium to front-month Singapore gasoil swaps last month, compared with a 30¢/t discount in February. And the premium has since increased, ballooning to an eight-month high of $6.19/t on 12 April.

European diesel demand is proving resilient in the face of lockdown restrictions. Last week, independently-held stocks of gasoil in the Amsterdam-Rotterdam-Antwerp (ARA) storage and trading hub dipped to their lowest weekly level in a year, according to consultancy Insights Global, down by 15pc from their year-to-date peak in February. Northwest European diesel cargo premiums to the North Sea Dated crude benchmark have averaged around $6/bl in April so far. This is around $1/bl higher than the March average, although it is less than half of pre-pandemic April 2019 levels.

One reason for the relative strength in European diesel prices is that European crude values have outpaced those in Dubai. In late February, front-month Ice Brent crude futures rose to a nine-month high premium against front-month Dubai crude futures and have broadly sustained a relatively high premium since, partly reflecting maintenance downtime at Chinese refineries. Meanwhile, gasoil shipments to Europe from east of Suez have been boosted by refiners in the Middle East ramping up runs. According to the IEA, refinery throughput in the Middle East rose to 7.5mn b/d in the first quarter, from 7.2mn b/d in the previous three months and 6.9mn b/d in January-March last year.

Spain and Italy have taken more than 10pc each of Europe's diesel and gasoil imports from east of Suez this month, already more than they received in the whole of last month. Belgium has taken more than either of them, but slightly less than it did last month. And France is leading the way, having imported 344,000t from east of Suez in April so far, 76pc more than it took in the whole of March despite a new national lockdown starting on 3 April.

By Benedict George