Europe-bound diesel diverted to stronger Asian market

* At least two tankers redirected to Singapore

* Vitol floating storage vessel also heading East

* Flow unlikely to change dim outlook for Europe diesel

By Ron Bousso and Jessica Jaganathan

LONDON/SINGAPORE, Nov 30 (Reuters) - Diesel cargoes which had planned to discharge in a heavily-supplied Europe have recently been redirected to Asia where the strong demand and refinery outages have constrained supplies.

The reverse in flows is likely to lead to a weakening in Asian diesel refining margins but is not expected to change the picture for Europe as markets struggle with a sharp increase in global diesel refining capacity, traders said.

In one instance, the 100,000 tonne Anatoly Kolodkin was en route to the Mediterranean from the port of Jamnagar in India before making a u-turn in the Red Sea on Nov. 25, according to Reuters ship tracking. It (Other OTC: ITGL - news) is currently sailing towards Singapore.

SKS Darent, with a 100,000 tonne haul of diesel was initially scheduled to head to Europe but is now en route to Singapore from Jamnagar, the loading point for product from Reliance's refining complex, according to traders.

The SKS Tagus, a 90,000 tonne tanker Vitol chartered in early October to store gasoil in the Mediterranean, is also currently in the Red Sea en route to Asia. It remains unclear if and where the vessel will be discharged.

Several refinery glitches in Asia, including one at Royal Dutch Shell's 500,000 barrel-per-day (bpd) refinery in Singapore's Bukom Island, have tightened diesel supplies in the region in recent weeks.

India's annual fuel demand in October surged at its fastest pace in nearly 12 years driven by higher sales of gasoil and gasoline ahead of festival season in Asia's third-largest economy.

But the outlook for Asia's distillates market remains dim with growing supplies expected to hit the market next year as Chinese refineries increase exports.

The picture for Europe remains equally grim as storage levels in the region continue to creep higher and imports from Asia, the Middle East, the U.S (Other OTC: UBGXF - news) . Gulf Coast and Russia are only set to increase in the coming months.

Despite the unusual tanker movements, more than 1 million tonnes of diesel are expected to reach Europe from Asia and the Middle East in December, according to traders.

Demand in Europe is also set to seasonally decline in the coming months. A short-lived rise in water levels on the Rhine river passageway in Europe has failed to boost diesel demand as traders had hoped, putting further pressure on refining margins.

"It is the effect of strong turnarounds in the Middle East and unexpected outages in the Far East (Kuala Lumpur: 5029.KL - news) as well as good demand in India in October," one European trader said.

(Additional reporting by Libby George in London)