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Global Diesel, Jet Fuel Supplies Rebound as Hormuz Reopens, Vortexa Says

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Seaborne exports of diesel and jet fuel are rebounding as the reopening of the Strait of Hormuz eases supply concerns, although refinery outages in the Middle East and Russia could limit further price declines, Vortexa analyst Pamela Munger said in a Thursday note.

Global middle distillate loadings have risen well above the seasonal average for June on a 28-day moving average and are expected to increase further as more exports leave the Middle East Gulf, where some refining capacity remains offline following recent damage.

The recovery has coincided with a sharp fall in diesel and jet fuel prices since June 19. Diesel has traded at a premium to jet fuel, while the ICE gasoil forward curve has flattened, reflecting weaker prompt prices and easing fears of supply shortages in Europe.

Supplies from alternative exporting regions have also increased. Combined middle distillate exports from the Red Sea, the US Gulf Coast and Nigeria were about 30% higher during March-June than a year earlier, with roughly 60% of the increase coming from the US Gulf Coast, where refineries have operated at historically high rates since January.

Higher seaborne crude exports from Middle East producers are expected to encourage higher refinery runs in Asia after operations were curbed earlier this year by weak domestic demand and government measures to restrain fuel consumption.

Middle distillate exports from Asia, excluding China, rebounded sharply in June, surpassing seasonal averages.

However, Vortexa said several factors could keep a floor under prices, including the pace of repairs at Middle East Gulf refineries damaged by drone attacks and ongoing disruptions to Russian refining.

Facilities, including Satorp, Sitra and Ruwais, continue to operate below capacity, limiting supplies by an estimated 800,000 barrels per day to 900,000 b/d.

Russian seaborne diesel exports fell below 600,000 b/ in June, their lowest level since 2016, amid refinery damage and reports of a potential diesel export ban.

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