Diesel Shortage Looms in Europe as US Supply Dwindles

Europe's dependence on diesel is facing a significant challenge as a combination of factors threatens to create a supply shortage. This comes after the continent significantly increased reliance on US imports following sanctions imposed on Russia in the wake of the Ukraine war.

According to data analysis from ship tracking firm Kpler, US diesel exports to Europe nearly halved in February, dropping from 11.44 million barrels to a mere 6.65 million barrels compared to the previous month. This dramatic decline is attributed to technical issues and planned maintenance shutdowns at key US refineries. Production has fallen a concerning 10% below the seasonal average for the past five years, further exacerbating the supply squeeze.

Adding fuel to the fire are disruptions in traditional supply routes from the Middle East and Africa. Attacks by the Houthi militia in the Red Sea have forced oil tankers to take longer detours around the Cape of Good Hope, disrupting established shipping lanes.

Europe's own diesel stockpiles are also dwindling after significant exports to other regions like Latin America in January. This has left the Amsterdam-Rotterdam-Antwerp (ARA) refining hub with considerably lower reserves.

The impact of these converging factors is already being felt in rising gas prices across Northwest Europe. Prices have jumped from $109 per barrel in February 2023 to over $118 this year, reflecting the tightening supply.

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