Middle East diesel exports to Europe slump on refinery disruptions, US supplies

Middle East diesel exports to Europe dropped to an 11-month low in October, as refinery disruptions and more product from the US and India curbed supplies, according to analysts and the latest shipping data.

Diesel exports dropped to an average 248,000 b/d in October, the lowest since November 2022 and down from 307,000 b/d in September, S&P Global Commodities at Sea data showed. US shipments to Europe climbed to 115,000 b/d in October and already total 236,000 b/d for November compared with 262,000 b/d from the Middle East. Saudi Arabia's SATORP refinery was also under maintenance for all of October while Kuwait's Al-Zour refinery faced several unplanned incidents, crimping its supplies of diesel along with fuel oil.

"Al-Zour is probably the main reason" for the Middle East diesel downturn to Europe, said Eleanor Budds, research and analysis director at S&P Global Commodity Insights.

"In addition, the diesel arb [arbitrage] from the US Gulf Coast to Europe has been viable recently so more volumes have been coming across the Atlantic, although with US diesel stocks now reported at their lowest point since May, these flows are expected to dry up."

Refinery maintenance in the Middle East and India has also crimped supplies in the region, she added. With Al-Zour restarting and the Duqm refinery in Oman ramping up and other refineries coming back after maintenance, "there should be some improvement at the end of this year and into January," Budds said.

However, another source noted that Europe typically tries to use up stockpiles for year-end inventory management. "December and January are terrible months in Europe because of destocking for bookkeeping," the source said. Companies prefer to destock tanks because unused inventory will be reflected on their balance sheets. Also, traders take less risk and exposure at the end of the year due to the winter holiday period, the source added.

Al-Zour diesel shipments were zero in October and no cargoes have been registered for November, according to the shipping data. Production was down to 325,000 b/d at the end of October from 392,000 b/d early in the month and 410,000 b/d at the end of August, according to owner Kuwait Integrated Petroleum Industries, a subsidiary of Kuwait Petroleum Corp. The refinery came to a "near-complete halt" after a malfunction of a valve delivery fuel gas to the plant, it said on Nov. 12. The restart expected to be in 10 days was not disrupted after a fire broke out on Nov. 16.

Click to explore our interactive chart looking at Middle East diesel exports to Europe

Saudi Arabia's SATORP refinery, with capacity of 460,000 b/d and located in Jubail, was under maintenance since the end of September through to mid-November, a source directly involved and a shipping source said.

"The exports are down mainly because of Jubail, the arbitrage was open but Saudi was unable to keep up," a Mediterranean-based source said.

Maintenance of some operations at India's Jamnagar refinery, owned by Reliance Industries, started in the second half of September and is expected to last until mid-November, market sources have said. Reliance operates the world's biggest refinery complex at Jamnagar, in Gujarat on the west coast of India. The production capacity at the export-oriented plant at Jamnagar stands at 35.2 million mt/year, or 704,000 b/d.

The Middle East has been considered a key alternative source of refined products after the EU banned imports of Russian oil products on Feb. 5. B after its invasion of Ukraine. Before the war, Europe was a major buyer of Russian diesel, importing some 780,000 b/d in February 2022. In October 2023 just 80,000 b/d of Russian diesel was seen in European waters, according to CAS data. To fill the gap, Europe has turned to alternative sources such as the Middle East and the US Gulf Coast.

On top of the EU step, Russia itself stopped diesel exports on Sept. 21 to reduce domestic prices, although it subsequently allowed exports of diesel delivered to ports via pipeline under certain conditions. While gasoline export restrictions were lifted on Nov. 17, diesel restrictions remained in place.

Among other product trade flows from the Middle East to Europe, gasoline and naphtha shipments climbed in October from September while jet fuel exports were the lowest since May, CAS data showed.