Late summer data shows us that the Wider Arabian Sea middle distillates keep moving West, but several factors are likely to cap export capacity in Q4.
Late summer data shows us that the Wider Arabian Sea middle distillates keep moving West, with an outlook on autumn maintenance in the Middle East and India’s festive season capping export capacity, factors which look set to stay supportive into Q4. With European refineries also in turnaround, both the E-W and TA arbs are likely to stay profitable, pulling the marginal barrel from PADD 3.
Wider Arabian Sea middle distillate flows to Europe remain dominant through late summer, with August export numbers out of the region matching last year’s levels at close to 1.1mbd. The key difference in 2025, is that European middle distillate cracks have stayed relatively strong, with average August diesel cracks up by 50% y-o-y, and jet fuel cracks up by 39% y-o-y (Argus). This has made the East-West arb much more profitable for East of Suez refiners, incentivising a strong export program going into September.
At the same time however, looming supply side-constraints are expected to come in October and are likely to cap the available volume for export to Europe. Q4 refinery turnarounds in the Middle East, such as the Satorp refinery (460kbd, Argus) and the Mina Abdullah refinery (490kbd, Argus), will mean fewer barrels available for exports to Europe.
Middle East middle distillate exports to Europe and announced Middle East CDU capacity out (kbd, LHS) vs ME to NWE diesel arb ($/t, RHS)
Based on current announcements, over 700kbd of the Middle Eastern CDU capacity will be offline in October-November. Indian supplies, as an alternative, will also be constrained to some extent, as the Diwali celebration in late October usually boosts domestic road fuel consumption. Refiners from these two regions will likely maximise their exports to Europe given the current profitable arb, but this might not be enough to satisfy the European balance.
Seasonal maintenance in Europe typically reduces intra-Europe product supply in Q4. Last year, autumn refinery maintenance in Europe peaked in October at approximately 2mbd of CDU capacity offline. The 2025 total is still unclear, but planned works in ARA during Q4 (Pernis (404kbd) and Antwerp (340kbd), Argus) already suggest some increased dependence on seaborne supplies.
A slowdown of East of Suez flows is likely to come with a simultaneous increase in loadings from PADD 3. In 2024, Middle East refinery turnarounds in Nov-Dec prompted diesel exports from PADD 3 to Europe to reach seasonal highs. Given the Middle East maintenance schedule is expected to come earlier this year, and given structurally stronger middle distillate demand in Europe, flows from PADD 3 to Europe are likely to come earlier as well.
PADD 3 diesel/gasoil exports to Europe (bd)
However, PADD 3 will likely have a wide variety of demand centres, such as Europe, but also Brazil. Russia diesel exports are under pressure, due to drone attacks and seasonal maintenance, making PADD 3 the most viable option to satisfy winter diesel consumption. Distillate inventories in the US, especially PADD 1 are tracking at the bottom of the seasonal range, despite builds in recent weeks (EIA). Additionally, PADD 3 autumn refinery maintenance has historically peaked in October, which limits the available supplies for export.
All these factors converge and point to elevated cracks in Q4 if the maintenance schedule transpires as expected.
Tanker baskets of MR2s for selected origins
Vortexa’s Anywhere Freight Pricing indices show that MR2 freight rates originating from the Gulf of Mexico have performed better than other MR routes this summer.
Heading into the winter, these various and resilient pull factors for PADD 3 diesel in Q4 discussed above, are likely to make MRs positioned around the Gulf of Mexico the clear winners once again.
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Market Analyst
Market Analyst