Global gasoil and diesel markets are tightening at an “alarming” pace with supply shortfalls now hitting key consuming markets worldwide, a new report from Alphatanker suggests.
US refined product markets have tightened well ahead of other key consuming markets, largely as US refinery throughputs have struggled to surpass their average levels following the closure of a tranche of refinery capacity.
As US diesel demand has approached its pre-pandemic level, US Gulf distillate stocks have drawn steadily to now stand towards the bottom of the five-year range. Furthermore, on a days-of-forward-demand basis, US distillate inventories now cover a below-average 29 days compared with 54 days at the turn of this year.
“This tight market has propelled US diesel prices to seven-year highs and consequently made US product less competitive abroad,” Alphatanker pointed out in its latest weekly report.
Weekly EIA data shows US diesel exports have averaged 1m barrels per day over recent weeks, 200,000 per day below their seasonal average. Alphatanker ship tracking data imply that shipments to Latin America have borne the brunt of this fall and that this has fed into a persistently poor regional MR2 market.
Distillate remains the main space heating fuel of choice for around 4% of US households.
“This suggests that US exports will struggle and thus cannot be relied upon to lift western Atlantic MR2 demand,” Alphatanker suggested.
The situation in Europe has many similarities. Following a tough 18 months for European gasoil markets which indirectly resulted in several 490 refineries shuttering, latest data imply that the European inventory overhang was depleted over recent months so that they are now estimated by Alphatanker to stand below average for the first time since April 2020.
If these shuttered refineries are now reopened soon, more gasoil barrels will need to be sourced from East of Suez bringing a boost to LR demand.
Significant shortages of gasohol are being reported in China too.
“Seaborne diesel trade is likely to pick up globally and there could potentially be some surprising trades and flows over the coming weeks and months,” Alphatanker predicted.