Europe’s diesel tightness persists into Q4

Europe's diesel tightness continues into the fourth quarter. September saw the lowest imports of diesel/gasoil on record. Exports of diesel/gasoil from Europe to other regions averaged only 1mbd, down 600kbd year-on-year. Most of the decline is attributed to Russia and the Middle East, which are down 580kbd compared to last year.

Sea-based diesel imports to Europe are more than 25% below last year's levels, indicating another weak month in October. Europe's refinery runs are expected to fall by around 600kbd in September after reaching a yearly high in August. Refineries such as Tarragona, Thessaloniki, and Gonfreville, which have strong margins, have delayed maintenance into 2027.

This maintenance season may have already peaked in September rather than October. Unexpected announcements, like the Fawley shutdown or unplanned outages, could further extend maintenance. The US remains the key external supplier, providing 41% of Europe's diesel in September, up from August but still below August's high. US seaborne diesel exports are flat compared to the previous month, with Latin America taking a larger share due to falling utilization rates in PADD 3.

Shipping US diesel to Europe is becoming more expensive, with Houston-Amsterdam MR2 rates increasing to $90/t, a 73% rise in a week. China's seaborne diesel exports have surged, but almost none are heading to Europe. Most Chinese diesel cargoes are landing in East Africa, where buyers pay a premium to replace supply lost from the Red Sea.

India is the most relevant eastern supplier, with exports to Europe increasing by 50% month-over-month to 240kbd in September, but this is still 23% below last September's volumes. Europe enters winter with diesel/gasoil inventories in ARA 25% below seasonal averages and with no other supplier able to step up quickly. Europe's domestic refinery supply could be vulnerable after a long period without maintenance, increasing the risk of unplanned outages.