China’s biggest refiner is eyeing a creative strategy to help rid Asia of a persistent diesel glut — brand new supertankers usually reserved for crude oil. Unipec, the trading arm of China’s biggest oil refiner Sinopec Group, hired a newly-built very large crude carrier to load low-sulfur diesel in Asia for delivery to Europe. The vessel ordinarily would have sailed empty from its shipyard in Northeast Asia to the Middle East or West Africa, where it would pick up crude for the first time for delivery to customers across the globe.

Headed to Europe

VLCC Yuan Hua Yang is en route to Rotterdam after picking up multiple cargoes in the East of Suez.

While supertankers are built to transport dirty fuels such as crude oil, they can carry cleaner products like gasoline and diesel on their maiden voyage. Unipec intends to charter brand new vessels on a regular basis to transport more diesel to Europe, thereby clearing out bloated fuel stockpiles in Asia, according to two traders familiar with the matter, who asked not to be identified as the information is private.

“This is definitely good news for Asia refiners. Moving these barrels out of Asia will tighten supplies and support regional margins,” said Serena Huang, senior analyst at Vortexa Ltd. “That said, traders will only move the barrels if the arbitrage is positive for them.”

Unipec isn’t alone. At least two to four fresh supertankers, chartered by trading houses and oil majors, are expected to ship diesel west of the Suez Canal in November, according to a trader and two shipbrokers. That comes after about seven carried distillates on maiden voyages in the third quarter, compared with four in the second quarter, Braemar ACM Shipbroking data showed.