Diesel shipments from India to Europe have hit their lowest levels since 2022 this month, primarily due to ongoing Houthi attacks on merchant ships disrupting international trade. This has redirected more cargoes towards Asia instead.
Flows to the European Union and UK have drastically dropped due to heightened freight costs caused by the turmoil in the Red Sea and unexpected refinery maintenance in Asia. As a result, it’s become more economically viable to send cargoes east rather than west.
Data from Vortexa Ltd., as compiled by Bloomberg, indicates that arrivals of fuel from India into Europe averaged a mere 18,000 barrels a day in the first half of February, marking a plummet of over 90% compared to January’s average. This decline is attributed in part to the increased shipping costs to the west last month.
James Noel-Beswick, an analyst at Sparta Commodities, highlighted that the economics favored exporting eastward to the Singapore region. Tankers destined for Europe or the Atlantic Basin are being compelled to either take the longer route around South Africa’s Cape of Good Hope, incurring higher costs, or risk using the Suez Canal with its attendant dangers and exorbitant war risk insurance.
Imports of diesel-type fuel into the EU were nonexistent in the initial two weeks of February, with only one shipment recorded for the UK during the same period. However, vessels such as the Marlin Sicily and Marlin La Plata, having loaded barrels in India, are en route to Rotterdam, with the former expected to arrive later this month.
Conversely, arrivals of diesel-type fuel from India to various Asian destinations, including Saudi Arabia and Bangladesh, witnessed a surge in the first half of the month. Additional cargoes, aboard vessels like the Peace Victoria and Orange Victoria, are currently sailing towards East Asia.
Noel-Beswick anticipates that improved arbitrage economics will likely lead to an uptick in diesel exports from India to Europe in the upcoming weeks.
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