ARA diesel, gasoil stocks jump 8.5% on week on lack of storage elsewhere

london — Diesel and gasoil inventories in the Amsterdam-Rotterdam-Antwerp trading hub rose 8.5% on the week to a seven-week high of 2.123 million mt as of Wednesday, Insights Global data released Thursday showed.

According to market participants, while overall demand for diesel as a road fuel remained in the doldrums due to coronavirus lockdowns, demand for heating oil remained healthy because of very low prices and, despite a slight slowdown this week, it continued to support the ultra-low sulfur diesel barge market. However, less ULSD than in March could be used to fill 50ppm gasoil shorts in Germany and Switzerland due to the switch to summer spec ULSD which has less stringent cold properties. Moreover, low Rhine water levels meant that barges could not load more than half their capacity on average, which has been pushing barge freight higher.

"We still have good demand here, mainly on the heating oil, we are surprised that this demand is still ongoing, it is a bit quieter but still very healthy as prices are very low," a Switzerland-based trader said. "Barges can take only 1,100 mt at the moment on the Rhine, it is a bit difficult to organize," he also said, adding that barge freight for the Rotterdam-Basel route had jumped to CHF38/mt (around $39/mt) Wednesday from CHF24/mt early last week.

According to German waterways authority WSV, Rhine water levels at the key choke point of Kaub were pegged at 116 centimeters as of 0300 GMT Thursday, down from around 133 cm on April 10, and were expected to fall further to around 110 cm by Sunday afternoon.

Meanwhile, most storage locations apart from the ARA hub had reportedly reached their capacity or were almost full because of the plunge in road fuel demand and with freight rates at record highs making storage economics difficult, there were few other places for the surplus diesel to go.

One market source based in the US said that with storage inventories of distillates filling up on both sides of the Atlantic, he remains bearish on gasoil and ULSD prices in the coming weeks. "The European heating oil market is smelling pretty bad right now....I am trying to find a reason to like heating oil in the US" but I just don't see one, he said.

The source added that while the outlook for distillate spot market prices is bearish, with values now well below historic norms, prices will not go negative because there is still storage capacity which remains empty. "Seems like there's still space to place" ULSD and gasoil he said.

In the US, commercial stocks of ULSD -- with a maximum 15 ppm of sulfur – jumped 8 million barrels to 123.2 million barrels for the week ended April 17, according to data Wednesday from the US Energy Information Administration. On the US Gulf Coast, ULSD inventories increased 2.7 million barrels on the week to 39.3 million barrels, while on the US Atlantic Coast they rose by 3.7 million barrels to 37.4 million barrels.