Weak fundamentals in the Mediterranean ultra low sulfur diesel market -- including refineries returning from maintenance and product arriving from the East -- have pulled spot prices below those in Northwest Europe, where supply and demand is better balanced, sources said.
The market for 30,000 mt diesel cargoes in the Mediterranean was assessed at a $1/mt discount to 20,000 mt cargoes in the north Wednesday, the biggest discount since April 13 when it was $1.50/mt, S&P Global Platts data showed.
The Mediterranean typically prices at a premium to Northwest Europe due to logistical restrictions at regional ports meaning they have limited ability to accommodate large ships.
Northwest Europe and the ARA storage hub, on the other hand, often emerge as a natural outlet for Long Range tankers coming from East of Suez as well as flows from the US Gulf Coast.
"Physically speaking, there are three key factors [why the Mediterranean is weakening]. The first is that despite the closed arbitrage from the east we still see a lot coming and that is covering the shorts of the big players," a source said.
"Secondly, there are not many outlets for Med refineries, and thirdly more of them are coming back from maintenance. The floor [for prices] is coming first to the Med, rather than the north, and that is the explanation for the pressure. The north is more short," a source said.
Sources in the north have been painting a flat picture of diesel movements. "Demand is not very bad but can be easily filled with available cargoes. Supply is adequate," one source said.
CIF NWE cargoes were assessed at $450.75/mt Wednesday, with Mediterranean cargoes at $449.75/mt.
