Europe's Fuel Market Weathers Hormuz Shock, Risks Persist, Vortexa Says
Europe has so far managed to avoid a major transport fuels crunch despite the closure of the Strait of Hormuz, Vortexa strategists said in a note on Tuesday, while noting that shrinking inventories and growing reliance on US supplies leave the region exposed to further disruptions.The closure of the strategic waterway has reduced Europe's access to Middle Eastern crude and refined fuels, which accounted for about 30% of the continent's seaborne diesel and jet fuel imports and 10% of crude and condensate imports between January 2023 and February 2026.Ernest Censier, market analyst at Vortexa, said Europe has offset much of the lost supply through stronger refinery runs, alternative imports and inventory drawdowns.Middle distillate imports from the Middle East Gulf collapsed to just 40,000 barrels per day in May, the lowest level in Vortexa's 10-year dataset and down 540,000 b/d from a year earlier.To plug the deficit, Europe has increased purchases from West Africa and the US. Vortexa said imports of jet fuel from Nigeria's Dangote Refinery have driven West African middle distillate exports to Europe to record levels, while US Gulf Coast exports of diesel and jet fuel to Europe surged in April and May.However, Europe's seaborne imports from external regions remained down 20% over the year for diesel and 50% for jet fuel and kerosene in May.Vortexa said the shortfall has been partly offset by stronger refining activity across Europe, supported by higher profit margins and resilient crude supplies.Seaborne crude and condensate imports averaged 11.5 million b/d between March and May, up from 11 million b/d a year ago. Record inflows from the US Gulf Coast, Norway and Kazakhstan's CPC Blend crude helped compensate for a decline in Middle Eastern shipments.Simultaneously, European crude inventories have fallen by 12.9 million barrels since April 1 and are running 4% below year-ago levels, indicating refiners have been processing more crude to meet fuel demand.Refining economics have strengthened significantly following the disruption of roughly 16 million bpd of Middle Eastern crude and refined product supplies to global markets. Northwest European refining margins for gasoline, jet fuel, and diesel have risen sharply from a year ago, encouraging refiners to maximize output and defer maintenance work.Vortexa said the increased activity is reflected in intra-European fuel shipments, which were running 150,000 b/d above year-earlier levels as of June 7.On the demand side, road fuel consumption has begun to soften. Eurozone automotive fuel sales fell 3.5% year over year in April, while UK motor fuel sales fell 10%, despite government measures, including tax cuts and fuel subsidies, in several European countries.Jet fuel demand, however, has remained resilient. European flight traffic was 0.7% higher than a year earlier as of June 7.The contrasting trends have tightened fuel inventories. Stocks of jet fuel in the Amsterdam-Rotterdam-Antwerp hub have fallen 39% from a year ago to their lowest level since 2020, while diesel inventories are down 10%.Going forward, Vortexa said Europe's fuel balance will remain heavily dependent on sustained exports from the US, which supplied 18% of Europe's seaborne diesel and jet fuel imports and 22% of crude and condensate imports in May.
