Europe’s Oil Refiners Boost Crude Buying Amid High Diesel Prices

European oil refiners are increasing crude oil purchases amid high diesel prices and disruptions to Middle Eastern shipments due to Red Sea tensions, boosting physical crude prices according to trading sources.

• West Africa’s Forcados and Egina grade were recently offered at a premium of more than $5/bbl and $7/bbl over Brent, compared with a premium of $4/bbl and $6/bbl a month ago, traders said.
• The grades have benefitted from being rich in diesel and delays to Middle Eastern shipments that drove European importers to buy shipments closer to home, traders added.
• “The physical market’s awakening to the fact that the Red Sea disruptions are indeed disrupting physical flows and Europe needs more than it has right now,” Viktor Katona, lead crude analyst at Kpler, said.
• TotalEnergies has been seeking WTI Midland, bidding for it almost daily since the start of the month. Prices for the US grade against the benchmark have risen by about 50ct/bbl during the period.
• Crude pricing is “pointing to a tight physical market right now,” James Davis, director of short-term oil market research at FGE, said. That’s “somewhat surprising given we should be seeing length in crude markets in February and March” ahead of refinery works.
• The upcoming European refinery season could weigh on the recent strength. Maintenance is scheduled to peak at around 1.2mbpd in April, Energy Aspects said. Shipbroker Gibson said refinery maintenance is expected to peak around March.
• European diesel cracks surged to $32.73/bbl on Friday, the highest since 29 September.
  • Gasoil MAR 24 down -0.8% at 874.75$/mt
  • EU Gasoil-Brent down -1$/bbl at 31.72$/bbl