By Three and a half weeks after the Strait of Hormuz’s closure, a clear divergence is emerging in global oil flows, with crude shipments plummeting to historic lows while clean product loadings surge, particularly from the Atlantic Basin, as traders capitalise on price dislocations to resupply markets, according to a Vortexa analysis.
The Middle East Gulf is currently withholding about 1.6 million barrels per day of motor fuels (including gasoline/blending components, jet fuel, and diesel) compared to the previous year, Vortexa’s data showed.
“This tightening has pushed jet and diesel prices to just under $200/b, with margins up 150% since the start of the conflict,” Pamela Munger, head of market analysis EMEA at Vortexa, said in the analysis.
A new trend is currently developing: a significant rise in Atlantic Basin diesel liftings, showing an increase of 800,000 barrels per day year-over-year.
Drivers of Atlantic Basin diesel surge
This increase in flows over recent weeks is likely a response to strengthening arbitrage signals, particularly for destinations in Africa and Asia, with commercial players being incentivised by the record-high prices.
The growth in liftings has been supported by the demand in the Gulf of Mexico, the Mediterranean, and Northwest Europe, Vortexa said. These three regions collectively account for 75% of the motor fuels export market within the Atlantic Basin.
The primary drivers for this change are likely the increased PADD 3 refinery utilisation rates, which rose to 96.7% for the week ending March 20 from 89.5% for the week ending February 27, Munger said.
Furthermore, the return from maintenance season in the Mediterranean and Northwest Europe also contributed significantly.
Inventory levels for refined products in Europe appear to be consistent with seasonal norms.
Specifically, Insights Global, as reported by Argus on March 23, shows that diesel inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region are at their five-year seasonal average.
In contrast, PADD 3 (Gulf Coast) diesel stocks in the US are above their seasonal average, according to data from the Energy Information Administration. While ARA jet fuel has seen a counter-seasonal decline, it remains within its normal seasonal range, settling just below the five-year seasonal average.
Global risks and forward outlook
“Looking forward, despite the high liftings for motor fuels in the Atlantic Basin, global risks remain,” Munger added.
Asian refiners have announced reduced operating levels, or “run cuts,” because of varying storage capacities. Simultaneously, governments across the region are continuing to seek measures to limit the demand for motor fuels, aiming to prolong existing inventories.
Competition for PADD 3 diesel barrels is intense, particularly from PADD 5, Northwest Europe (NWE), East & South Africa (E&S Africa), and recently, Brazil, exacerbated by the attacks on Primorsk/Ust Luga, according to the Vortexa analysis.
“The longer the closure of the straits continues, the likelihood that demand destruction will set in and consumers adjust behaviour according to higher prices,” Munger said.
“The US is likely to be the least impacted due to limited dependence on Middle East Gulf crude and refined product imports.”
The post Hormuz closure squeezes motor fuels; jet/diesel margins up 150%: Vortexa appeared first on Invezz
