Atlantic Basin diesel imports from East peak in April

Vortexa data shows almost 1.2mbd of diesel/gasoil is expected to arrive into the Atlantic Basin this month from the East of Suez, a strong 300kbd m-o-m increase. The rising flows are partly due to higher flows from Saudi Arabia and India, both historically large suppliers to Europe, but the latter nation's flows westwards are much more likely to come under pressure in the coming weeks.

 Atlantic Basin diesel/gasoil imports from East of Suez by origin country (mbd)

Rising flows from Saudi Arabia fit with a more general and steady rise in country's total diesel exports, stretching back the the end of 2023, and the end of planned maintenance work at some refineries. But rising flows from Saudi Arabia to the Atlantic Basin are also supported by higher exports to Europe specifically from the Saudi Red Sea port of Yanbu. By exporting from here in higher volumes, Saudi Arabia does not suffer to the same extent as other East of Suez refiners from elevated freight costs and voyage duration for sailing around the Cape of Good Hope. In contrast, India - as the furthest east regular exporter to Europe - will be feeling the extra costs of exporting to Europe moreso, particularly given that arbitrage opportunities between regions are also narrowing. Price data (Argus Media) shows the premium for Ice Gasoil in Northwest Europe to Singapore 10ppm gasoil stood at around $11/t on 25 April, down from $59/t a month earlier. Another important point is the recent emergence of a contango market structure in Ice gasoil futures. Having been consistently in backwardation since May 2023, prompt prices fell below second-month contracts in mid-April and have remained so since. Looking ahead, this points to oversupply in Northwest Europe, the largest diesel-importing market in the Atlantic Basin. If flows from east-to-west are to continue, it will require further declines in East of Suez diesel prices, thereby opening up a "push-arb" for new flows to resurface.