Asia Diesel Glut Widens Following Russian Ban

SINGAPORE: Asian gasoil stocks have spiked in the last few weeks as regional refineries are struggling to export their product to markets outside the Suez, limiting the ability to ship barrels to Africa. The influx of Russian crude cargoes in Africa and the eastern Mediterranean has created a surplus of supply in the continent that is displacing Asian products, which is being compounded by sanctions imposed by the European Union on Russian oil products from February 5.

Gasoil premiums in Asia have seen a significant decrease over the past two months, shrinking from US$1.60 per barrel to 70-90 cents per barrel against Singapore gasoil prices. This is due to an oversupply of transport and industrial fuel, with limited demand locally and from Europe where stock levels are also high. Analysts suggest that these low spot prices and premiums could remain in effect for the near future.

Singapore's stockpiles of oil rose to their highest level in more than a year for the week ending March 15th. This is seen as a sign that regional cargo is being directed to the Asian hub for short-term storage purposes.

In addition, Russian exports to African countries such as Tunisia, Morocco and Egypt have increased consistently since December 2020 and are expected to exceed 1.15 million tonnes in March 2021 - levels not seen in the past four years.

Russian Diesel loading to the eastern Mediterranean region will remain at a level of 1.3 million tonnes or higher, according to data. This is like the volumes seen in February.

The Middle East and India have provided sufficient supplies for South Asian markets such as Bangladesh and Sri Lanka, as the arbitrage market between northwest Europe and Kuwait's Al Zour refinery has been closed during its second phase start-up. As a result, exporters from Asia have had fewer available destinations.

Exports from North and Southeast Asia to northwest Europe dropped drastically in January and February. The dip is from a recorded high in the fourth quarter of 2022. From March to April, most cargoes from Asian countries have been heading to storage tanks located in Singapore or Malaysia due to weak consumer demand.