The U.S. refining sector has experienced a marked decline in activity, while simultaneously, disruptions in global trade have significantly constrained diesel exports.
This phenomenon has resulted in a notable reduction in U.S. diesel exports to Europe this month, which had previously reached historically high levels.
Challenges and proposals for diesel exports
The challenge of procuring diesel from the United States is exacerbating the supply crisis already facing Europe, especially considering its previous dependence on fuel exports from Russia. This month, U.S. diesel prices experienced a temporary spike, reaching a four-month high of more than $48 per barrel, which has restricted arbitrage opportunities for fuel shipments to Europe.
It was also noted that European imports of U.S. diesel fell sharply, almost by half, totaling 6.65 million barrels, compared to the 11.44 million barrels recorded in January. This change marks the lowest level since August 2017, according to analysis by Kpler, a firm specializing in ship tracking.
Analysts at Macquariehave pointed out that“European diesel exports appear to be the most affected product due to diversions, limited supply availability and distorted arbitrage“, underlining the complexity of the current situation in the fuel market.
Decline and fall of diesel in the current year
The decline in diesel trade coincides with the temporary closure of the BP Whiting refineryin Indiana, which has a capacity of 435,000 barrels per day and is a major U.S. diesel producer. This closure was necessary in early February due to power outages.
This event aligned with operational problems at other plants exacerbated by a cold snap in mid-January, including TotalEnergies’ 238,000 bpd Port Arthur, Texas, refinery. For example, other facilities such as Motiva Enterprises’ Port Arthur plant, with a capacity of 626,000 bpd, are currently under planned maintenance.
As a result, U.S. refinery utilization rates have seen a drop from about 93% at the beginning of the year to 80.6% this month, registering the lowest rate since December 2022, according to government data.
New changes in the value of European diesel fuels
U.S. refinery distillate production declined to 4 million barrels per day in the week ending February 9, also marking the lowest point since December 2022. This reduction has led U.S. distillate stocks to decline for five consecutive weeks, falling 10% below the seasonal average of the previous five weeks.
Diesel export prices in northwest Europe have shown an upward trend during February, averaging over $118 per barrel, in contrast to $109 in February last year.
Finally, an increase in European diesel export prices is anticipated, especially as refineries in Europe are scheduled to undergo their own changes during March and April. This situation could spur renewed interest in U.S.-produced diesel flows to Europe, according to Matt Smith, an analyst at Kpler.
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Source: Reuters
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