West Africa diesel arbitrage incentive softens as Med strengthens

Diesel exporters from India and the Persian Gulf may look to shift flows from West Africa to the Mediterranean, as margins improve in the Med while healthy arrivals may soften premiums in Offshore Lome, according to S&P Global Energy data.

The Med diesel market has strengthened in recent days as stronger cross-Mediterranean freight and an uptick in physical spot trading activity boosted differentials.

Platts assessed the ULSD CIF Med cargo differential to the February ICE low sulfur gasoil futures contract at $16.25/mt Jan. 15, up from $9.25/mt on Jan. 5 and in the freight market the Clean Med-Med 30kt rate was assessed at $17.25/mt Jan. 15, down from $20.62/mt on the day but up from a recent low of $11.86/mt Jan 9.

Sources said that bullish freight could be more the product of the regional tensions than tighter fundamentals as Med diesel remains well-supplied.

"[Cross-Med freight] I would say it's reflecting some supply anxiety around possible Red Sea, Iran, Suez, etc., plus you had the CPC attacks earlier in the week," a European distillate trader said.

Market activity picked up in January as well, with Platts Market on Close assessment process for Mediterranean diesel cargoes seeing four trades between Jan. 9 and Jan. 15, compared with one trade between Dec. 15, 2025, and Jan. 8.

West African remains a more attractive outlet for diesel demand, but the premium is narrowing as the market strengthens in Europe.

Platts also assessed the CIF MED vs STS Lome discount at minus $8.75/mt Jan. 15, in from minus $19/mt Dec. 15.

In recent months, drawn by the relatively more attractive margins, exports from the Jamnagar refinery landed across West Africa in large volumes through November and December, predominantly discharging in the Offshore Lome market.

According to S&P Global Commodities at Sea, the Sikka terminal at Jamnagar loaded four cargoes that are due to Lome from Jan. 14-30. These include two long-range 2 tankers, an Aframax and a Suezmax of diesel. This is up from 3 LR2 ships along this route in December and none in November.

Arbitrage economics show Lome gasoil sustaining premiums above 10ppm MOP West India gasoil prices. The Platts-assessed 50ppm STS Lome price was assessed Jan. 15, at an $84.03/mt premium to 10ppm Gasoil MOP West India, wider than the $75.28/mt premium for ULSD CIF MED.

The calculation is the same from the Persian Gulf. Gasoil from the region is hitting multimonth lows, opening attractive arbitrage opportunities to the Med and West Africa with WAF offering better netbacks on paper.

Platts, part of S&P Global Energy, assessed the FOB Arab Gulf 10 ppm sulfur gasoil cash differential at an eight-month low of $1.65/b on Jan. 12, before recovering slightly to $1.70/b on Jan. 15.

One concern in the market was the status of Nigerian refined product import licenses. Five traders said they had not received import permits from the Nigerian Midstream and Downstream Petroleum Regulatory Authority for the unloading of fresh refined products into Nigeria in January. This could further shift the incentive to send cargoes toward the Med.

"Lome premiums would still be higher (than the Med) but people are starting to worry about import licenses," said a trader looking at the WAF region.