DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

President Donald Trump’s support for restricting US diesel exports has produced an immediate twist in fuel markets. The threat of cutting off foreign shipments has helped make those same cargoes more profitable for traders seeking to move them abroad.

Diesel traders monitor the gap between New York futures and prices in Rotterdam to assess whether transporting fuel from the US to Europe can generate a profit. European prices raced ahead after Trump said he favored a restriction on exports.

That widening opportunity arrives as Europe urgently seeks diesel supplies. The Iran war has removed a swath of supply, while attacks by Ukraine on Russian oil refineries have added further tightness to the global market.

The US has become Europe’s top external supplier of diesel. That reliance has fueled concern among European politicians because the available pool of alternative suppliers is shrinking.

A ban would be widely expected to send US diesel prices sharply lower, at least in the short run. With exports halted, more American fuel would remain inside the domestic market rather than moving to overseas buyers.

The disruption would not stop at Europe. American allies including Brazil and the UK would also need to secure replacement fuel quickly if US shipments were halted.

For now, the economics of moving diesel across the Atlantic remain attractive. Sparta Commodities, a researcher, said the arbitrage is open for cargoes from New York and the Gulf Coast that are booked for immediate shipping.

That opening reflects the price relationship between the American and European markets. Traders can benefit when the spread is sufficient to cover the costs associated with buying, transporting and delivering physical diesel cargoes.

A shipbroker said in a note that activity has increased as expectations of possible export restrictions build. Ships are being booked for departures at the end of September and during October.

Rates for products tankers crossing the Atlantic have climbed to their highest level since early August. The increase signals stronger demand for vessels capable of moving refined fuel cargoes between the two markets.

The futures comparison, however, is only an indicator of whether an arbitrage trade will actually make money. US futures typically trade slightly above European contracts, so the headline spread does not capture every cost or adjustment involved.

Most physical US diesel supply comes from refineries along the Gulf Coast. It does not come from New York, even though New York is where the futures contract used by traders is based.

To calculate whether a specific physical shipment will be profitable, traders apply premiums or discounts to available supplies. Those adjustments can determine whether an apparently open arbitrage opportunity remains worthwhile after the actual cargo is priced.

Several traders and brokers reported heightened interest in booking tankers to carry US diesel to Europe after Trump’s comments. The rising level of interest suggests market participants are moving while exports remain available and the transatlantic pricing remains favorable.

Nymex futures plunged close to parity with European contracts during the week, according to fair value data compiled by Bloomberg. That marked a sharp departure from the average gap of about 23 cents a gallon during the first eight months of the year.

The market response highlights the immediate commercial impact of uncertainty surrounding export policy. While a ban could push US prices lower and force foreign buyers to scramble, talk of restrictions has initially encouraged traders to book ships and pursue profitable export opportunities before any halt takes effect.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.