BRASÍLIA: Brazil has joined a list of countries exporting diesel to Europe, reversing a traditional route and underscoring a weakening of the largest South American economy. At least two 37,000-ton cargoes of diesel, on the tankers Torm Gunhild and MT Alexandros, have sailed in recent weeks from Brazil to Europe, according to Reuters ship tracking data and traders. Torm Gunhild is heading to Venice and is chartered by Italian oil company Eni, while MT Alexandros has been chartered by trading house Glencore and is set to discharge in the Canary Islands.
Traders linked the rare arbitrage to Brazil’s economy, which has struggled with a deepening recession in recent years. Its economic output fell 3.8% in 2015 and is expected to decline by the same amount in 2016, according to the International Monetary Fund. According to trade sources, one of the cargoes loaded distillates off the coast of Brazil from a vessel that originated at India’s Reliance oil refinery.
Diesel consumption in Brazil, which imports much of its needs from the US, Asia and, at times, Europe, has also been on a steady decline. “We do not expect diesel demand to increase significantly until the wider economy recovers,” consultancy Energy Aspects said last month.
Europe is the world’s main hub for diesel due its heavy use. A sharp increase in diesel refining capacity around the world has led over the past year to a sharp increase in supply, in Europe in particular, putting heavy pressure on diesel refining margins. France’s Total is offering to sell a 270,000-ton cargo of diesel into Europe, which would be the largest cargo ever sold in the region, according to traders.
