Freight Rates for Transatlantic Voyages Soar as Europe Pulls More US Diesel
Freight rates for Medium Range (MR) product tankers hauling diesel from the U.S. Gulf Coast into Europe have tripled over the last two weeks as supply worries caused by the Iran-Israel conflict in the Middle East lure traders back into the transatlantic route.
The TC14 index, which reflects the cost of chartering a 38,000 metric ton diesel cargo from Houston to Amsterdam, reached a 12-month high of over $35,500/day on Wednesday. This is up from $15,600/day a week ago and $9,200 two weeks ago, according to Baltic Exchange.
Makai Marine Advisors founder Jeff McGee said that TC14 tanker earnings have surged due to a combination of thin tonnage lists showing fewer available vessels and surging exports.
U.S. diesel exports averaged 1.65 million barrels/day in the week ended June 20, the highest for any week since August 2024, the Energy Information Administration (EIA) reported Wednesday.
U.S. exports tend to rise in the summer, when domestic gasoline demand prompts refiners to increase production rates, which results in excess diesel output. The country’s refinery utilization rate hit an 11-month high of 94.7% last week.
“The seasonality of U.S. Gulf Coast (USGC) diesel exports peaks about now, which is a function of crude runs, local demand and PADD1 starting to pull USGC diesel later in the summer,” McGee told OPIS.
This has come in handy for European buyers who were spooked by the escalation in conflict between Israel and Iran and a potential closure of the Hormuz Strait, a key chokepoint for crude oil and middle distillate supplies into Europe.
The exchange of strikes in the Middle East Gulf (MEG) caused freight rates and diesel margins to rally in Europe, creating an additional incentive for USGC refiners to export more volumes.
“These levels were certainly high enough to pull USGC diesel to Europe, which loading last week would arrive in Northwest Europe (NWE) in early July. TC14 did not pop until the Tuesday after the first strikes, so if the USGC tonnage list got cleaned out last week, then the surge in TC14 this week makes sense,” McGee said.
According to shipping analytics firm Vortexa, U.S. diesel exports into NWE rose by 25% last week relative to the previous week.
“There are a number of reasons for this product flow. Despite low diesel demand forecasts in Western Europe, ARA gasoil stocks in June are down year on year: there is therefore a need for stockbuilding for inventories to recover. We are also seeing record import demand in the Mediterranean for diesel and fuel oil imports due to power generation demand,” Vortexa analyst Delia He told OPIS.
Meanwhile, Kpler’s lead freight analyst Matthew Wright believes that that the market is set to peak now, with position lists starting to lengthen.
“Also, considering there was no real impact on MEG loads, the risk to supply availability in Europe has also quickly faded,” he said.
Still, James Noel-Beswick, the head of distillates at Sparta Commodities, argued that the recent increase in transatlantic diesel exports is likely to persist in July, reflecting strong U.S. refinery runs and less competition from Brazil, where premiums are slipping.
Last year, the European Union imported 14.2 million mt of ultra-low sulfur diesel (ULSD) from the U.S., compared with 19.8 million mt from the Middle East and 7.3 million mt from India.