[LONDON] Tankers carrying diesel from the Middle East and Asia are being diverted from Europe to the US East Coast, with refinery cuts across the Atlantic offering a selling opportunity as European storage brims and demand sags.
The United States has become in recent years one of the world's largest exporters of diesel and jet fuel and imports of the products are rare, even though imports of high-sulphur gasoil to the US East Coast occur during winter.
But US refinery output cuts in recent weeks, including Exxon Mobil Corp's Baytown plant in Texas, the nation's second largest, has offered better prospects in the New York Harbour areas than in Europe, the world's biggest diesel demand hub, traders said.
In Europe, diesel and gasoil storage levels in the Amsterdam-Rotterdam-Antwerp (ARA) hub are near record highs as imports into the region from huge refineries in the Middle East and Asia continue to flood the market.
In recent days, several tankers en-route to Europe from the East have been diverted across the Atlantic, according to traders and Reuters ship tracking.
The 90,000-tonne long-range Raysut tanker, chartered by Litasco, the trading arm of Russian oil company Lukoil , loaded with diesel on Jan 25 at the Ruwais refinery in the United Arab Emirates and set sail to Europe, only to be diverted towards New York in recent days.
Similarly, the 38,000-tonne Front Dee and Arendal tankers which loaded gas-to-liquids (GTL), a fuel used with diesel and jet fuel, are now heading to New York after crossing the Mediterranean.
The 60,000-tonne Marilee tanker chartered by trading house Castleton loaded jet fuel from the Reliance Industries Ltd 580,000 barrels per day Jamnagar refinery in India, and is currently heading to Freeport in the Bahamas, where the company has storage.
The European diesel market has been under huge pressure in recent months due to swelling storage levels and high imports that have led traders to store product on tankers, order ships to take longer routes to Europe and even make U-turns in mid Atlantic ocean.
And while European coastal storage levels are nearly full, experts and traders emphasized there was still ample space on the US East Coast.
Independent US refiners including Valero Energy Corp , PBF Energy INC, Philadelphia Energy Solutions and Monroe Energy, a unit of Delta Air Lines Inc, are curbing output, capitulating to record stockpiles and sluggish winter demand that have hurt profits.
Exceptionally strong global demand for gasoline over the past year has meant that European refineries have operated at near maximum level in order to lock in strong margins, even as they pump more diesel into the market.