KEY POINTS
- Asia will ship 1.8 million to 2 million tons of diesel to Africa in August, at least a four-and-a-half-year high, as buyers replace Middle East supply.
- Middle East exports to Africa fell to 600,000 to 800,000 tons, the lowest in nearly nine years, with Jazan refinery shipments dropping to zero.
- A wider east-west price spread and stronger Asian margins pulled more cargoes west, a trade seen holding near term.
Asia’s diesel exports to Africa are set to hit at least a four-and-a-half-year high in August, according to ship-tracking and trade data, as African buyers chased alternative supply after Middle East shipments dropped.
The opening emerged from conflict. Specifically, the US-Iran war disrupted Middle East exports, while Iran-aligned Yemeni Houthis blockaded Saudi Arabia in the Red Sea and struck Saudi Aramco’s Jazan refinery, cutting Saudi flows to Africa. Consequently, Asian refiners stepped in to fill the gap.
Asia fills a widening gap
Asia, including India, will ship 1.8 million to 2 million metric tons of diesel to Africa this month, or roughly 13.4 million to 14.9 million barrels, data from Kpler, Vortexa and one trade source showed. Meanwhile, Middle East diesel exports to Africa fell to 600,000 to 800,000 tons in August, the lowest in almost nine years, as risks persisted through Bab el-Mandeb and the Strait of Hormuz.
The shift marks a sharp reversal. According to Kpler, around 50 percent of Africa’s imports came from the Middle East last year, with 40 percent of that from Saudi Arabia. However, lower refinery runs at sites such as Jazan capped Saudi exports further. Indeed, Jazan shipments to Africa fell to zero in August, down from 163,000 tons in July.
Prices steer barrels westward
Furthermore, pricing pulled cargoes toward Africa. The front-month east-west spread widened to minus 135 dollars per ton in August from minus 100 in July, which made western sales more attractive. Therefore, traders diverted more diesel to the region rather than keeping it in Asia.
According to Energy Aspects analyst Alex Yap, east Africa will keep pulling barrels from Asia while Saudi tankers avoid Bab el-Mandeb, since Europe cannot spare volumes at current ultra-negative spreads. Additionally, he said recovering Asian refinery runs and resumed Chinese exports should keep the westbound arbitrage viable near term.
Margins reinforced the trend. Specifically, Asian refiners’ diesel margins averaged 66 dollars a barrel in August, up from 61 dollars in July, encouraging plants to maximize output. Nevertheless, the Singapore diesel cash premium cooled to a one-month low of about 4 dollars a barrel as spot availability rose.
