Europe enters autumn season with diesel shortage and low inventories

Europe’s diesel market is facing a supply shortage ahead of the autumn season and a rise in seasonal demand. Regional inventories are well below normal levels for this time of year, while European diesel prices are significantly higher than those in Asia, Bloomberg reports.

A rare shipment of diesel from South Korea to Northwest Europe highlights the tight market. In September, the tanker Priamos is expected to carry around 90 thsd tons of fuel over a distance of more than 19,000 km. The cargo could be delivered to the UK or Rotterdam. The deal is being facilitated by Trafigura.

Such a long-distance shipment has become economically viable due to the substantial price gap between European and Asian diesel markets. The spread between the two regions recently reached its widest level since at least 2023. South Korea typically exports refined products mainly to markets in the Asia-Pacific region.

Europe’s diesel shortage is being exacerbated by limited refining capacity and disruptions to global supplies caused by the conflict in the Middle East and the Russia-Ukraine war. Meanwhile, Asian refineries continue to produce refined products actively, while China is expected to increase fuel exports in September.

The tight diesel market coincides with the period of intensive autumn fieldwork and new-crop transportation in Europe. Persistently high fuel prices could increase farmers’ machinery and transportation costs while further raising the cost of road logistics for grains and oilseeds.

Tags: EU, stocks, diesel fuel