An LR2 of ultra low sulfur diesel is heading from the Baltics to Gibraltar in the first sign that the wide spread between Mediterranean and Northwest Europe is opening an arbitrage.
The 105,475 Minerva Pisces loaded ULSD at the Latvian port of Ventspils on January 30 as is estimated to arrive in Gibraltar on Thursday, according to shipping sources and S&P Global Platts trade flow software cFlow.
Gibraltar is a typical location for ship-to-ship operations, particularly for the West Mediterranean markets.
The spread between CIF NWE and CIF Mediterranean has rebounded slightly from a year high last week to be assessed at a difference of $6.00/mt Friday.
On a FOB ARA/CIF Mediterranean basis the spread performed similarly, coming off the widest level in a year to be assessed at a $19.00/mt difference Friday.
The Mediterranean has steadily strengthened as the market has churned through domestic supply amid closed arbitrages from the East and the US.
However, with a heavy turnaround season ahead, the market is anticipating tightness, which has helped drive up differentials at the same time as demand comes out of the post-holiday lull.
While the arbitrage was still heard to be difficult on Handysize cargoes from the Amsterdam-Rotterdam-Antwerp hub, the economy of scale gained from using an LR2 is perhaps making it more workable on bigger vessels.
Material from the North to the Mediterranean is not a typical flow, with the East and the US usually more capable of supplying the Med before the spread widens sufficiently for suppliers in the North.