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Mediterranean diesel at 32-month high amid lack of smaller vessels

London — Diesel in the Mediterranean hit a 32-month high at a $13.50/mt premium to ICE low sulfur gasoil futures Tuesday, as cargoes on Handysize vessels were in short supply, sources said.

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Vessels able to call at many of the Mediterranean ports have been lacking as a result of a closed arbitrage from the US Gulf Coast, regional refinery maintenance, and lower volumes being exported from the Black Sea due to Russian refinery maintenance.

Diesel has been entering the region on Long Range vessels from east of Suez but these generally struggle to fill many of the shorts in the region due to their large size.

The cost and logistics involved in transferring this diesel onto Handysize tankers was creating a shortage in the region, with the larger vessels needing to discharge into tank in one of the few ports able to accommodate them before another vessel takes the product to the smaller ports typical of the region.

Ship-to-ship transfer operations were an option but the cost was greater and so none have yet been seen in the region, traders said.

The STI Steadfast was seen calling at Barcelona Saturday, having carried diesel from Yanbu, according to market sources.

Traders were said to be looking to bring volume from the Amsterdam-Rotterdam-Antwerp region to the Mediterranean amid the tightness and a weaker ARA barge market.

FOB ARA barges were assessed at an $11.25/mt discount to CIF Mediterranean cargoes Tuesday, having reached a 17-month low of $13.25/mt on May 10.

The Atria, a Medium Range vessel, was said to be on subjects to take 30,000 mt of diesel from ARA to the Mediterranean, according to S&P Global Platts fixtures data.

However, that was not a particularly wide open arbitrage, traders said, with LR tankers from east of Suez providing better value supply.

"It is true that market is tight but it is not dry. There are some cargoes available but they are expensive," a trader said.

--Christopher Ewen,
--Virginie Malicier,
--Edited by Dan Lalor,