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Falling Rhine levels add pressure to already weak ULSD, 50ppm gasoil barge markets

London — Falling Rhine water levels leading to short loadings of barges are adding pressure to already weak ultra-low sulfur diesel and 50ppm gasoil barge markets in Northwest Europe.

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According to German waterways authority WSV, Rhine water levels at the key chokepoint of Kaub had fallen to 103 cm by 0400 GMT on Nov. 26 from around 117 cm on Nov. 20 and were forecast to further decline to 87 cm by Nov. 30.

When the water level nears one meter at Kaub, most oil product barges can only load half of their capacity, and even less if levels fall below one meter, according to market participants.

"Inland stocks are 75% full. There is not really a need to buy when [inland stocks] are almost full," a trader said. "With higher freight rates and higher flat prices, buyers will wait."

The contango in the European middle distillates paper markets steepened slightly on Nov. 25 as flat prices hit fresh multi-month highs.

The front-month versus second-month spread on the ICE low sulfur gasoil futures was assessed at minus $ on Nov. 25.

The news of a COVID-19 vaccine has increased the contango in market structure, creating demand for storage of diesel and jet fuel, which has supported prompt prices.

However, already high stocks in Europe and low Rhine levels have capped demand for barges.

In the ULSD market, demand to bring barges from the Amsterdam-Rotterdam-Antwerp hub to consumption centers in Germany, Switzerland and northeastern France was already thin due to high levels of inland stocks and falling road fuel consumption due to the second wave of lockdowns.

Market participants in Germany and Switzerland have estimated that demand has fallen between 10% and 20% since the re-introduction of restrictive measures, while several traders have said their tanks are either "full to the brim" or almost full.

"[There are] high stocks indeed and demand is hardly there," a second trader said Nov. 25. "I think Germany is pretty full from the period in March-April, with very low demand as well with loads of people working from home,"

FOB ARA ULSD barges slumped to a $3.25/mt discount to the front-month ICE low-sulfur gasoil future on Nov. 24, a one-month low, before rebounding slightly to a $2.75/mt discount on Nov. 25.

Demand for 0.1% and 50ppm gasoil barges was also poor due to high inland stock levels and mild winter temperatures failing to draw them. FOB ARA 50ppm barges were assessed at a $5.75/mt discount to the front-month ICE LSGO futures on Nov. 25 after reaching a nine-week low of $6.5/mt on Nov. 24.

A third trader said "there is little water in the Rhine but freight is still fairly cheap due to the lack of demand for barges."