European Diesel Margins Tumble Over 7% as Import Surge Outweighs Supply Risks

European diesel profit margins plunged by more than 7% on Monday, as a surge in seaborne imports weighed on the market. The premium of low-sulfur gasoil futures over Brent crude, a key indicator of refinery profitability, narrowed by $5.52 to $70.79 per barrel as of 16:12 GMT.

Trading and Market Activity

Trading activity in the physical market was mixed. In the afternoon window, BP sold one cargo of ultra-low sulfur diesel (ULSD) for delivery to Gdynia, Poland.

Meanwhile, the Mediterranean trading window saw active bidding but ultimately closed with no completed deals. TotalEnergies was the sole company to post an offer during the session, according to market participants.

Conflicting Supply Signals

The drop in margins comes amid conflicting signals on the supply front. On one hand, a potential disruption emerged from Russia, while on the other, import volumes into Europe have risen sharply.

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Two industry sources reported on Monday that Russia's Perm refinery, the country's seventh-largest, has suspended operations following a fire caused by a Ukrainian drone attack on August 21. The attack reportedly damaged production facilities.

However, the impact of this outage was overshadowed by robust import data. According to analytics firm Kpler, diesel and gasoil arrivals into the EU-27 and the UK are set to climb significantly:

• August imports are projected to average 724,000 barrels per day (bpd).
• This marks a substantial increase from July's average of 466,000 bpd.
• The United States is the dominant supplier, accounting for over 50% of the total with 446,000 bpd in August.

The market's sharp downward reaction suggests that traders are currently more focused on the immediate oversupply from high import volumes than the potential future tightness from the Russian refinery disruption.