- Europe’s Middle Distillate Imports Drop to Multi-Year Lows.
- India Shifts Clean Product Exports to East of Suez Markets.
- Red Sea Supply Constraints Deepen Tonne-Mile Decline.
LR tonne-miles saw a steep decline in December 2024 and January 2025 due to reduced middle distillate imports into Europe and shifting export patterns in the Wider Arabian Sea. With Red Sea exports declining and India West Coast exports remaining within the Pacific Basin amid weak European demand, Europe has become increasingly reliant on imports from the Mideast Gulf, reports Vortexa.
Key Factors Behind the Drop in European Imports
Europe’s imports of diesel, gas oil, jet fuel, and kerosene fell by 32% year-on-year in January 2025 and dipped below the seven-year range. This decrease correlates to seasonally depressed demand in January and an overabundance of barrels coming in at the end of 2024. The supply imbalance was caused by a sudden increase in imports from East of Suez in October of last year, as well as an influx of transatlantic diesel from an excessively supplied US market. Northwest European diesel imports from PADD 3 skyrocketed to a multi-year high in December of last year.
India’s Exports Pivot Towards the East of Suez
Since November 2024, India’s clean product exports have shifted away from West of Suez markets, particularly Europe, toward East of Suez destinations such as Southeast Asia, Oceania, and East and South Africa. This shift intensified during the pre-Lunar New Year demand surge, which created a tight East of Suez market with more favorable pricing for refiners in the West Coast of India and the Red Sea region.
Red Sea Supply Constraints Exacerbate the Slump
Middle distillate exports out of the Saudi Red Sea declined by almost 50% from the previous month to a multiyear low in November 2024, at the lowest level since 2021. The decline was primarily due to scheduled maintenance shutdowns at Saudi Arabia’s Yanbu (400 kbd capacity) and Jizan (400 kbd capacity) refineries. Middle distillate exports from the Wider Arabian Sea to Northwest Europe and the Mediterranean declined to all-time lows in the period.
Collapse in LR Tonne-Miles on East-West Routes
The reorientation of middle distillate trade from the Wider Arabian Sea towards the Pacific Basin has severely impacted LR tonne-miles, which fell by 91% from November 2024 levels. The average voyage distance to Pacific Basin destinations is approximately 70% shorter than voyages to the Atlantic, further reducing tonne-mile demand. This effect was exacerbated after October 2023 when vessels started bypassing the Suez Canal in favor of the longer Cape of Good Hope route due to Red Sea security risks.
India’s Eastbound Exports Surge
Between November 2024 and January 2025, middle distillate exports from India’s West Coast to the East of Suez increased by 7%. The shorter voyage distances have weighed on the freight market, contributing to the steep drop in tonne-miles for LRs supporting this trade.
More Downward Pressure on LR Tonne-Miles
Unless European middle distillate demand recovers, LR tonne-miles are likely to remain under pressure. A restart of Saudi Arabia’s Yanbu and Jizan refineries may restore some middle distillate flows to the West of Suez, but these are expected to be short-haul shipments to the Mediterranean. Further pressure on LR tonne-miles could come if voyage distances shorten if the Bab-el-Mandeb Strait reopens for Red Sea transits. However, as yet, there is no sign of vessels being prepared to recommence use of this route.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Vortexa
