Asia-Europe Gasoil Spread Narrows as US Rethinks Possible Diesel Exports Ban
The wide East-West Exchange of Futures for Swaps values for gasoil narrowed sharply to a discount of $177.50 per metric ton during Thursday morning trading in Asia, according to data from market sources, after the U.S. announced a rethink of a possible ban on diesel exports while exploring voluntary options instead.
The October E-W EFS value previously plunged to a discount of $199.57/mt, the largest since October 2022, as the Asia market closed on Wednesday after the U.S. stated it was considering a ban on diesel exports, compared to a discount of $161.69/mt on Tuesday.
In an interview at The Wall Street Journal’s Journal House during the United Nations General Assembly in New York City on Thursday morning, U.S. Energy Secretary Chris Wright said the Trump administration will implement voluntary measures to curb diesel exports instead, OPIS reported.
The Middle East region was the largest exporter of gasoil to Europe until the start of the Iran conflict in end-February. Exports from the Middle East to Europe fell to 1.0 million mt for the March loading period, compared to 2.71 million mt for the February loading period, according to data provided by Vortexa.
The deficit was covered mostly by Russia and the U.S. However, Europe became overly reliant on the latter after Russian refineries drastically cut diesel exports from June onwards, followed by an eventual ban starting July, as its oil refineries suffered multiple drone attacks from Ukraine.
The U.S exported 1.85 million mt of diesel in August to Europe, a record high according to available data by Vortexa stretching back to January 2016.
Indian gasoil exports also rushed in to fill the void left by Russia in July; July loading of Asian gasoil volumes to Europe surged to 709,900 mt compared to 98,300 mt in June, according to Vortexa.
The arbitrages for larger cargo sizes of gasoil from Northeast and Southeast Asia should be workable to Europe, especially if the vessel takes the Red Sea and Suez Canal route, instead of the longer route around the Cape of Good Hope, but volumes from the West Coast of India will remain more price competitive.
With Europe entering its peak demand season for diesel during winter, and volumes from the Russia and the U.S. uncertain, Asia will likely remain a key source of gasoil for European buyers.
—Reporting by Kite Chong, kite.chong@dowjones.con; Editing by Mei-Hwen Wong, mei-hwen.wong@dowjones.com