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Big tankers ferry surplus China fuel towards Europe

Brand new supertankers ferrying rare flow of surplus diesel from Asia to Europe, as surplus fuel from China scouts for a new home

At least three newly-built, extremely large Crude Carriers have loaded diesel from Tianjin in China and near Singapore– to reach faraway destinations like Fos Sur Mer in France by June or July– according to cargo-tracking company Kpler and compiled Bloomberg data.That compares with only two VLCCs laden with the fuel, that sailed from Asia to Europe in the entirety of 2017.

Peter Lee, an analyst at BMI Research stated: “Part of the reason behind the increased Asia-Europe diesel flow is the persistent fuels glut in China”. He added that it was this oversupply that had contributed to Asia’s diesel prices under-performing in Europe.

Lee also paid emphasis on recent statistics to support his statement. Placing importance to facts like: China’s diesel exports climbing almost 30% to over 10 MM metric tons in the first half from a year ago, with March shipments in particular hitting a record high ;The premium of the product in Rotterdam to the Singapore benchmark rising to $1.40/bbl in the second quarter from $0.80 in the first; and finally European fuel being at a discount of $0.70 an year ago.

The profit from turning crude into diesel in Asia was at $14.45/bbl Thursday after reaching this year’s low of $12.98 in June, according to Bloomberg Fair Value.

Diesel in Europe has remained strong on economic growth, seasonally-lower stockpiles and stable demand from the region’s large diesel-based transport fleet, according to Lee.“This is likely to have supported freight economics and Asian refiners’ desire to ship to Europe,” he said.

New supertankers being available have also helped increase the flow. VLCCs normally do not carry Diesel and other clean fuels – but sometimes they are

The availability of new supertankers has also helped increase the flow. While VLCCs normally don’t carry clean fuels like diesel, they are sometimes a more viable option than sailing empty on their maiden trips. These journeys cost relatively less due to the risk associated with first-time voyages, offering a cheaper transport option. A VLCC typically holds 2 MMbo.

Among the ships that take these trips, Maran Aphrodite wa notable for picking up a part of its cargo in April from Sinopec’s Tianjin refinery, and loading the rest in Pengerag before discharging some of its load at Malta Light and at Fos Sur Mer—according to data from Homa Kargar, a Paris-bases analyst for clean products at Kpler.

The data also showed that New Eminence, hired by the Chinese oil giant’s unit Unipec, has reached Lome to unload some supply after switching destinations several times. The company spokesman said: “Unipec has always focused on cross-region trades in order to expand oil-product export markets. Strong diesel demand from European market makes it a key target region. Using large tankers to transport is more economical and can create a better benefit for the company.”

More are set to flow out of China. Sri Paravaikkarasu,head of East of Suez oil at industry consultant FGE said: “We should be ready to embrace increased outflows from Asia,” she said. “The key factor to watch remains China’s lengthening surplus. In contrast, gasoil demand should only post a flat-to-modest growth. This will leave the market with greater Chinese exports.”

-GBO Correspondent

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