Europe Diesel Exports Hit Record as Harvey Redraws Trade
LONDON, Sept 22 (Reuters) - Europe is set to export a record volume of diesel in September as Latin American buyers struggle to recover from a drop in U.S. supplies in the wake of Hurricane Harvey, according to shipping data and traders.
Europe regularly imports large volumes of the road fuel as the region's refineries are unable to meet demand.
It is set to import over 2 million tonnes of diesel this month, but severe disruptions caused by Hurricane Harvey on refining operations in the Gulf Coast have led to a temporary redrawing of traditional trade routes.
At least 600,000 tonnes of diesel and heating oil are expected to sail from Europe and the Mediterranean to Brazil and Argentina in September, according to shipping data and traders.
"It's a bit of a perfect storm with Latin American refineries still struggling, especially in Mexico and Venezuela, and as U.S. product exports remain constrained," said Andrew Wilson, head of energy research with BRS Brokers.
A handful of cargoes are regularly shipped from Europe to Latin America every month, September's figures are nearly three times the highest average levels seen in recent history, according to traders.
Traders expect the European exports to continue for several more weeks.
"Harvey is causing all this. It made U.S. Gulf Coast exports very expensive and Europe is proving to be cheaper," a trader said.
Harvey knocked out about 4.4 million barrels per day (bpd) of refining capacity in the Gulf Coast, roughly a quarter of total U.S. capacity. Over 1 million bpd of crude distillation capacity remained offline this week.
Gulf Coast exports have gradually resumed in recent weeks, with several diesel cargoes booked to go to Latin America, according to shipping data. But traders expect the European exports to continue for several more weeks.
Brazil and Argentina are highly dependent on fuel imports due to a lack of domestic refinery capacity caused by years of under investment.
Diesel imports from the Gulf Coast, a major source of supply for Europe, are also set to sharply drop in September and October.
Coupled with low imports from Russia in September, European diesel stocks are expected to fall by nearly 2 million tonnes in September, according to several traders.
(Additional reporting by Libby George in Brussels; Editing by Edmund Blair and Mark Potter)
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