Darker diesel days

In September, I wrote a post trying to detail the supply situation with diesel ahead of the EU’s oil and fuel embargo on Russia. At the time, this situation certainly looked bleak, with a sizeable shortage looming on the horizon. Since then, things have not got better.

In the September post, I quoted a Bloomberg report that said the EU would need to raise imports of diesel from “regions such as the US, Middle East, India and other Asian countries.”

Indeed, China’s diesel exports have been on the rise. U.S. diesel exports appear to have remained strong as well but there’s a twist. U.S. buyers have been snapping up diesel cargoes bound for Europe.

Reuters reported in mid-October that “Traders are diverting Europe-bound tankers carrying diesel to the U.S. East Coast as the two regions battle for supplies amid an acute shortage and soaring prices.”

One might, if one is of a cynical nature, point out here that this serves Europe right for diverting LNG cargoes from poor Asian nations to satisfy its own gas hunger, outbidding those who cannot afford to pay extra-high prices.

At the same time, one is simply bound to point out that this was, well, bound to happen. The U.S. has been drawing down its diesel inventories for months. As of October, these are at the lowest since 2008 — an ominous sign in itself, like everything ending in “since 2008” these days — and only enough for 25 days of consumption.