September 9, 2015 / 4:45 PM / in 4 years

Record eastern diesel to hit Europe as mega refineries hit full stride

* September imports to surpass August’s 1.6 mln tonnes

* Distillates stocks in ARA hub at all-time records

* Refinery margins saved due to cheap crude

By Libby George and Ron Bousso

LONDON, Sept 9 (Reuters) - Europe is poised to receive record levels of diesel from the east this month as the region bears the full brunt of supply from new Middle Eastern refineries.

A mammoth 1.4 million tonnes of diesel has already been booked from new mega refineries in the Middle East, and export-oriented refineries in India, to land in Europe in September, according to traders and Reuters shipping data.

Traders expect several more shipments to be booked in the coming days, leading total exports this month to surpass August’s 1.6 million tonnes.

“It will be high,” one trader said of the imports, adding that it was likely to hit a new record.

Reuters shipping data shows more than 3 million tonnes in total of oil products en route from the east. The bookings include diesel on two oil product supertankers capable of carrying 1 million barrels each, the Atina and the Novo.

Three even larger mega tankers with 2 million barrels, the Gener8 Neptune, the Yuan Chun Hu and the Yuan Qiu Hu, are also set to carry distillates from South Korea to West Africa on their maiden voyages.

While Europe’s imports typically peak in the autumn, during refinery maintenance season, Middle Eastern shipments were turbo-charged by the addition of crude producer Saudi Arabia’s new 400,000 barrel per day (bpd) Yasref refinery.

That unit hit full capacity at the end of June, just as the Middle East’s own distillate consumption entered its summer peak.

In the first five months of the year, total Saudi distillate exports were 22 percent higher than the same period last year, according to JODI data, reaching an average of roughly 1.1 million tonnes per month. These shipments were aided by the 400,000 bpd Jubail refinery, which reached maximum output in late 2014.

“These two Saudi refineries have hit their full stride, and they’re going to keep pushing diesel to Europe,” said Harry Tchilinguirian, global head of commodity strategy at BNP Paribas. “That’s what they were built, configured and optimized for.”

Already, stocks of distillates in the Amsterdam-Rotterdam-Antwerp hub have hit all-time records, according to Dutch consultancy PJK International. Figures from industry monitor Genscape show gasoil stock levels in ARA at nearly 5.7 million tonnes at the end of August - nearly one million above the previous year.

Genscape pegs ARA gasoil storage at close to 70 percent of total capacity.

But traders and analysts said Europe’s refinery margins will be saved for a few more months, largely thanks to cheap crude, which cut refinery costs and spurred demand.

Low water levels on the Rhine river also crimped stocks in inland markets, such as Germany and Switzerland, meaning buyers in those countries will at some point need to restock from the ARA volumes.

“Demand is really strong...major importers turn over their tanks rapidly,” one trader said.

But others warned that if Europe’s already limited refinery maintenance is pared back further, stocks could be inundated.

“Refinery margins are crude driven, not demand,” another trader said. “If (refiners) run at maximum rates, the market will be flooded easily.” (Reporting by Libby George; editing by Susan Thomas)

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