Europe taps Dangote Refinery amid deepening jet fuel crisis

Data from Kpler indicates that Europe is facing a severe jet fuel deficit as traditional flows from the Persian Gulf remain restricted. While the Atlantic Basin, specifically the United States and West Africa, has attempted to fill the void, these alternative supplies have so far proven insufficient to bridge the widening gap.

This supply shock has transformed jet fuel into the most volatile refined product in the European market. Prices reached an unprecedented peak of $1,646.25 per tonne on March 12, maintaining near-record levels as traders grapple with a market characterised by poor visibility and sharp, unpredictable fluctuations.

Market insights from Argus highlight that jet fuel prices have now surged to more than double the price of crude, with premiums exceeding $100 per barrel for the first time in history and the spread against diesel widening to nearly $50 per barrel.

The current crisis underscores Europe’s precarious structural reliance on Middle Eastern exports, as at least 40 percent of the region’s jet fuel imports typically transit through the volatile Strait of Hormuz. With traditional routes under immense strain, industry experts believe Europe is unlikely to fully replace lost volumes from the Gulf through its usual channels.

“Dangote is ‘the best lever to pull’ among remaining import options,” said Amaar Khan, European head of jet fuel pricing, Argus. According to Argus, other market participants confirmed they are actively exploring opportunities to source additional cargoes from the facility.

Since it began exporting jet fuel in the second quarter of 2024, the 650,000-barrel-per-day refinery has steadily expanded its influence in international markets. Jet fuel has become the facility’s primary clean product export, accounting for more than half of its outbound shipments.

“Dangote is offering up to 44,000 metric tons of jet fuel for loading March 20-22 as well as at least 40,000 tons of ‌gasoil ⁠with a maximum sulphur content of 50 parts per million for loading ⁠March 15-30,” a source told Reuters earlier.

Traders said the refinery’s scale and configuration make it particularly suited to respond to Europe’s current supply squeeze. With global refining capacity shrinking, especially in Europe and North America, where nearly 800,000 to 900,000 barrels per day of capacity have been permanently shut, the market is increasingly reliant on large, complex refineries such as Dangote to stabilise supply.

“The Atlantic Basin is now central to Europe’s resupply strategy, but capacity remains constrained,” analysts at Kpler noted, pointing to West Africa as one of the few regions with exportable surplus.

European buyers have also highlighted the quality of the product. Market participants said Dangote’s jet fuel is “a relatively strong spec,” not only meeting standard Jet A-1 requirements but also satisfying the UK’s more stringent household heating fuel specifications.

The refinery’s growing relevance comes at a time when global refining capacity remains constrained, particularly in Europe, where plant closures in recent times have reduced domestic output and increased reliance on imports.

Around 30 refineries have shut down in Europe since 2009, with industry analysts forecasting that up to 90 could face closure due to high operating costs, low margins, and competition from new, high-capacity plants in Africa. Recent closures include Eni’s Livorno refinery, Petroineos’ Grangemouth refinery, and Shell’s Wesseling plant.

Analysts said this structural tightness has amplified the impact of geopolitical shocks on product markets, especially for aviation fuel.

Recent crude intake data further point to the refinery’s potential to scale up supply. According to Argus, monthly receipts exceeded 530,000 barrels per day in February, the second-highest level on record, indicating rising throughput and the possibility of increased product output in the near term. (BusinessDay)