European Diesel Margins Ease Slightly But Hold Near Record Highs on Mideast Supply Woes

European diesel refining margins retreated slightly on Friday but continued to trade near record levels, underpinned by ongoing supply disruptions stemming from the Middle East that are tightening the regional market.

Friday's Trading

The key metric for refinery profitability, the margin for low-sulphur gasoil futures over Brent crude, stood at $85.34 per barrel at 1637 GMT. According to market data, this represented a decrease of 30 cents from the previous session's close.

Despite the minor dip, these margins remain exceptionally elevated. This indicates that the market continues to price in a significant premium for refined products like diesel due to a mismatch between supply and demand.

Supply Chain Pressures

The primary driver for the strong margins is persistent disruption to shipping from the Middle East. Preliminary shipping data released Friday showed a significant slowdown in traffic through the critical Strait of Hormuz.

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Key figures on shipping activity include:

• Four commodity vessels passed through the strait on Thursday, down from six the day before.
• This volume is substantially below the 10-day average of approximately 16 vessels, highlighting the extent of the disruption.

European Inventory Levels

In Europe, stockpiles of diesel and gasoil at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub were largely unchanged. Inventories held steady at 1.65 million tons, with no imports recorded.

Looking ahead, traders are monitoring the arrival of eight cargoes scheduled for unloading by the end of the month, which could provide some relief to the tight regional balance.