LONDON: Benchmark European diesel refining margins weakened along with the rest of the oil complex on Monday, despite still tight supply throughout the Atlantic basin.
Distillate supplies were slipping across Europe as imports from the United States remained limited and shipments from Asia and the Middle East were expected to stay flat on the month.
US Gulf Coast exports, a key source of Europe's diesel, have ramped up as refineries return to normal operations following Hurricane Harvey, but there is fierce competition for the barrels from Latin American buyers, traders said.
While more than 600,000 tonnes is now expected to arrive on the route in October, this is roughly half of what had been regularly arriving before the storm.
Demand to export distillate cargoes from northwest Europe to Latin American destinations such as Brazil and Argentina has also continued, pulling some supply from the region.
Exports of ultra-low-sulphur diesel from the Russian Baltic Sea port of Primorsk could rise by 11 percent to 880,000 tonnes in October, up from the 770,000 tonnes initially planned in September, three industry sources told Reuters on Monday.
Sources had expected Russian exports, which fell in September, to remain subdued due to seasonal maintenance.
Europe's own production is limited by seasonal maintenance despite strong margins that have encouraged those who can to delay works.
Hedge funds have accumulated a record bullish position in middle distillates such as diesel, heating oil and gasoil, anticipating stocks will be relatively tight this winter.
GASOIL
No barges or cargoes of gasoil with 0.1 percent sulphur content traded.
Two barges of 50 ppm sulphur gasoil traded at discounts of $9 and $10 a tonne fob ARA to October diesel futures, compared with discounts of $8.50-$9 a tonne on Friday. Belgomine sold to Mabanaft and Vitol.
October ICE low-sulphur gasoil futures were down $13.75 a tonne at $534.50 a tonne at 1644 GMT.
The October contract traded in backwardation of $5.50 a tonne to the November contract, 50 cents narrower.
The prompt October diesel refining margin to Brent crude futures was 6.05 percent lower at $13.95 a barrel.
DIESEL
Fifteen diesel barges traded at discounts of $1.50 a tonne fob ARA to October diesel futures, compared with discounts of $1.20-$1.75 a tonne on Friday.
PertoIneos sold a cargo to Vitol cif basis Amsterdam.
JET FUEL
No jet fuel barges traded. KLM offered one barge at a $21 a tonne premium to October diesel futures.
BP sold to Shell one cargo at a $21.50 a tonne cif Le Havre premium to October diesel futures.
FUEL OIL
Barges of fuel oil with sulphur content of 3.5 percent traded at $309.50-$310 a tonne fob ARA, down from $316.50-$317 a tonne the previous trading day.
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