Egypt is ramping up diesel imports to keep its power plants running after Israel halted pipeline natural gas supply in response to its ongoing conflict with Iran.
The country is on track to receive 354,000 b/d of diesel and other gasoil in June, according to preliminary data from Vortexa. Kpler estimates a lower volume of 275,000 b/d. By comparison, Egypt imported an average of 217,000 b/d in 2024, both firms show.
More than 60pc of this month's imports are coming from Saudi Arabia, primarily from the Red Sea ports of Yanbu and Jizan. These cargoes benefit from proximity and a freight advantage, as they can reach Egypt while avoiding the security risks in the Bab el-Mandeb strait.
The surge in diesel demand follows Israel's suspension of gas exports to Egypt and Jordan on 13 June, after it shut production at the Leviathan and Karish gas fields in response to an escalation in its conflict with Iran. On the same day, Egypt's energy ministry announced it had halted gas supply to some industrial users and instructed power plants to burn diesel in the "maximum available quantity".
Egypt is seeking to ensure adequate power generation during the onset of the summer cooling season. Its need to replace lost gas supply with diesel is adding pressure to an already tight European diesel market. Already structurally short of diesel, Europe has faced reduced inflows from the Mideast Gulf and India since April, while US shipments have been limited. Diesel values and refining margins in Europe have shot up in the past week as supply concerns mount and freight rates rise.
The Mediterranean market is particularly tight following the introduction of a new International Maritime Organisation emissions control area (ECA) in May. The ECA requires ships to use fuel with a maximum sulphur content of 0.1pc, down from 0.5pc. Marine gasoil (MGO) and ultra-low sulphur fuel oil (ULSFO) meet the new standard. But much of the gasoil used in MGO blending is also suitable for desulphurisation and road fuel use, so its diversion into marine fuels is tightening diesel supply. Egypt could also turn to fuel oil for power generation, which may further increase MGO demand and tighten the Mediterranean diesel market.
Meanwhile, repair and maintenance work at Israel's two refineries has placed additional strain on diesel and other gasoil supply in the Mediterranean. The 197,000 b/d Haifa refinery was shut on 16 June after being damaged in an Iranian missile strike, and the Ashdod refinery entered partial scheduled maintenance on the same day.
Egypt is due to install two additional floating storage and regasification units (FSRUs) by the end of June. The added LNG import capacity could help offset the loss of Israeli gas and ease diesel demand.
