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US diesel exports to Europe dip on plummeting refining output

Aerial view of Phillips 66 Company's Los Angeles Refinery in Carson, California. — Reuters
Aerial view of Phillips 66 Company's Los Angeles Refinery in Carson, California. — Reuters

NEW YORK: A slump in US refining activity and disruptions to global trade have tightened diesel supplies in recent weeks, dampening historically high US diesel exports to Europe this month.

Difficulties in securing US diesel complicate an existing supply crunch in Europe, which previously relied on Russian fuel exports. US diesel cracks briefly surged to a four month high of over $48 a barrel this month, crimping arbitrage opportunities to ship the fuel to Europe.

Many of Europe's other suppliers in the Middle East and Asia have been forced to traverse around the Cape of Good Hope due to Houthi attacks on vessels in the Red Sea, adding lengthy delays and making that trade less profitable too.

European imports of US diesel fell by almost half this month to 6.65 million barrels, down from 11.44 million barrels in January, which marked the highest level since August 2017, according to analysis by ship tracking firm Kpler.

"European diesel appears to be the key at-risk product due to rerouting, supply availability, and distorted arbs," Macquarie analysts said in a note this month.

The decline in trade came as the 435,000 barrel-per-day BP Whiting refinery in Indiana - a major US diesel producer - was forced shut in early February following power outages.

That outage coincided with operational issues at several plants from a mid-January cold snap, like TotalEnergies' 238,000 bpd Port Arthur, Texas, refinery. Others, including Motiva Enterprises' 626,000 bpd plant in Port Arthur, are undergoing planned turnarounds.

US refinery utilization rates have fallen from near 93% at the start of the year to 80.6% this month, the lowest rate since December 2022, according to government data.

As a result, US refiners' distillates output slumped to 4 million barrels per day in the week ended Feb. 9, also the lowest since December 2022. US distillate stockpiles have dropped for five straight weeks and now stand 10% below the prior five-year's seasonal average, the data showed.

Diesel prices in Northwest Europe rose steadily throughout February, averaging over $118 a barrel, compared with $109 last February. — Reuters

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