European Diesel Margins Soar After Imports Dropped in June

The European diesel market is flashing warning lights after supplies from the Middle East plunged to multi-month lows in June.

Global oil prices spiked last month after traders were spooked by the exchange of missiles between Israel and Iran. Then, prices largely retreated as hostilities ended on June 24. However, European diesel margins are holding up.

The Northwest Europe (NWE) diesel crack relative to Brent crude surged to a 16-month high of $32.3/barrel on June 19, reflecting the region’s reliance on supplies passing the Hormuz Strait in the Middle East Gulf. Two weeks later, despite the Israel-Iran ceasefire, the crack remains high at $28.1/bbl, according to the most recent OPIS pricing data.

The fact is that, although the war between Israel and Iran didn’t materially impact flows transiting the Hormuz chokepoint, diesel exports from the east towards Europe had been falling since May—mostly because of unfavorable arbitrage economics.

The Middle East and India only exported 0.65 million metric tons of diesel to NWE in May, the lowest for any month so far this year, according to data from shipping analytics provider Vortexa. That largely reflected relatively stronger prices in Singapore, which resulted in more barrels being sent to East Asia rather than to Europe.

As a result, total diesel arrivals in NWE plunged to just 2.04 million mt in June, compared with 2.77 million mt a month earlier, leaving the market undersupplied. Imports from the U.S. Gulf Coast have surged in recent weeks, but that hasn’t been enough to offset the lack of supplies from the east.

Extreme supply tightness is also being reflected in the curve structure, with the prompt spread in Low Sulfur Gasoil (LSG) futures widening to a massive $23.25/mt on Tuesday. In the physical market, traders were paying premiums of up to $16/mt to secure spot barge shipments in Amsterdam, Rotterdam and Antwerp (ARA), compared to an average of $2/mt over the first half of 2025.

Looking ahead, diesel arrivals into NWE are expected to recover in July, with preliminary data showing 2.44 million mt of imports.

However, volumes coming out of the Middle East still appear weak, which may reflect domestic increases in demand during the summer.

–Reporting by Jaime Llinares Taboada, jllinares@opisnet.com