Traders divert Europe-bound diesel to U.S. in race to re-stock

By Ron Bousso and Laura Sanicola

LONDON/WASHINGTON (Reuters) -Traders are diverting Europe-bound tankers carrying diesel to the U.S. East Coast as the two regions battle for supplies amid an acute shortage and soaring prices.

At least two tankers carrying 90,000 tonnes of diesel and jet fuel are heading from Europe to the U.S. East Coast, according to traders and Refinitiv ship tracking data.

The Thundercat, carrying a cargo of diesel from the United Arab Emirates, on Thursday changed its destination from the Dutch port of Rotterdam to the New York Harbour, according to shipping data. It is currently in the Mediterranean.

Proteus Jessica, currently in the Atlantic Ocean, has in recent days changed its destination to New York from the Southwald waiting area off the southeast coast of England.

Sea Caelum, another mid range tanker carrying diesel, is also expected to reroute to New York Harbour, traders said.

The 35,000 tonne tanker Hellas Tatiana has also been provisionally booked by Exxon Mobil to deliver diesel from France to the United States, according to shipping data.

The vessel has been waiting in Port Jerome to load fuel products for nearly three weeks, since before the strike began at Exxon's 236,0000 barrel per day refinery, according to a trading source and shiptracking data.

Such diversions are rare as Europe, where refineries do not produce enough diesel to meet domestic demand, typically imports diesel from the United States as well as Asia and the Middle East.

In recent weeks European diesel refining margins hit all-time highs amid weeks-long strikes at French refineries that have shut down over half of the country's refining output and led to acute shortages at petrol stations.

But at the same time, a sharp drop in U.S. diesel inventories has pushed prices and refining margins there higher, opening up opportunities, known as arbitrages, to import diesel from Europe to the U.S. East Coast. [EIA/S]

In the United States, political pressure is mounting for refiners to increase domestic inventories in the northeast, which are near multi-decade lows, ahead of winter.

U.S exports of distillate fuel reached a record 1.76 million barrels in September, with more than 633,000 barrels of diesel sent to Northwestern Europe, according to Refinitiv data.

The Biden administration is considering limiting fuel exports to lower consumer prices.

The prospect of a ban may be muting futures price signals that would indicate more fuel is needed in New York Harbor, traders said.

(Reporting by Ron Bousso and Laura Sanicola; Editing by Kirsten Donovan and Mark Potter)