London-based Energy Aspects said distillate stocks at onshore tanks would climb in the second quarter as refineries returned from maintenance, triggering a return of the floating storage phenomena last seen between December and February in Europe.

More than 1 million metric tons of jet fuel and diesel was stored on tankers at anchor outside ports in northwest Europe in January, OPIS reported back then, as the glut of diesel that saw onshore storage levels hit records in December shifted to the sea.

“On the current trajectory for refinery runs, even with yield shifts and cuts at the margin, we believe floating storage will be needed in the Europe summer as inflows will soon exhaust what little storage space is freed up in the coming weeks,” Energy Aspects said in a monthly report on the distillates sector.

“Our balances look very bearish heading into July and August, with global supplies set to exceed demand by 800,000 b/d both May and June due to soaring refinery runs.”

The OPIS Tanker Tracker currently has four Long Range 2 tankers (each capable of holding 90,000-ton cargoes) being used for floating storage of diesel, and a further two for jet fuel in the region, including the Baltic. These were seen from early March.

Global refinery runs are forecast to surpass a record 81 million b/d in in the third quarter, the International Energy Agency said in an April 14 monthly oil report. OECD distillate inventories are at near-record levels because of the warm winter, the IEA report also said.

Floating storage is for logistical rather than speculative reasons, according to Energy Aspects. The report also highlighted how refineries in the Mediterranean had made “massive efforts” to swing diesel yields lower.

This was also seen in refineries on the Gulf Coast of the U.S., the second-largest supplier of diesel to Europe, after Russia.

Pressure on distillates across the Atlantic means U.S. Gulf stocks “have soared to levels last seen in 2010 when diesel markets were hugely oversupplied, putting pressure on refiners to push out barrels at even distressed prices at times,” Energy Aspects said.

That might explain above-average volumes of spot shipments seen to northwest Europe this month, at a time when the arbitrage, or profit, to ship diesel trans-Atlantic for sale looks closed.

“Diesel on the U.S. Gulf Coast has fallen in price enough that at times it has been near parity with VGO (vaccum gasoil), leading to plenty of speculation that refiners opted to recycle some distillates output through the FCC (fluid catalytic cracking) rather than use VGO, to further cut yields,” the report added.