U.S.-Europe Diesel Flow Seen Rising Amid Output at 23-Year High

The number of diesel cargoes booked for export to Europe from the U.S. Gulf Coast is set to climb after output of refined oil products was the highest in at least 23 years, a Bloomberg News survey showed.

Traders will charter 12 Medium Range tankers for loading to June 26, the average of estimates from seven shipbrokers specializing in the trade showed this week. That’s three more vessels, each normally carrying 38,000 metric tons of the fuel, than in a corresponding survey last week.

Production of distillate fuel oils on the Gulf Coast was the highest since at least January 1990 in the week of May 31, according to figures from the U.S. Energy Department, which classifies the area as PADD 3. Refinery restarts in the Midwest will lift capacity by more than 300,000 barrels a day, boosting Gulf Coast distillate exports, Fotis Giannakoulis, a New York-based analyst at Morgan Stanley, said in a report June 10.

“The U.S. is producing too much diesel and has to get rid of it,” Ehsan Ul-Haq, an analyst at KBC Energy Economics in Walton-on-Thames, England, said by phone yesterday. “Demand from the Middle East is also taking diesel out of the Mediterranean, and European buyers will replace this with diesel from the U.S.”

Hire costs for tankers on the Gulf Coast-to-Europe voyage gained for a fifth session in six yesterday, climbing 4.1 percent to 89.64 industry-standard Worldscale points, according to the Baltic Exchange in London.

Six of the projected bookings have been arranged and the rest are anticipated, the latest survey showed. Thirty tankers will be seeking cargoes, compared with 32 in the previous survey, according to the shipbrokers.

The survey is based on the Houston-to-Amsterdam route, a benchmark for the trade that takes about 17 days at 12.5 knots, according to the sea-distances.com website. The table below details numbers of ships booked, likely to be hired and available for charter for the two weeks from the stated dates.

*T June 12 June 5 Change Ships Hired 6 4 +50% Ships Probably Hired 6 5 +20% Total Hired 12 9 +33% Available Ships, U.S.-Europe 30 32 -6.3% *T

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