Inconsistent diesel supply in Germany is leading to increasing price differences between regions.
The rising cost of cargo imports into Hamburg since the summer is lifting diesel prices in northern Germany, while abundant product availability is pushing prices down around the 226,000 b/d PCK Schwedt refinery near the border with Poland, primarily because Polish buyers are importing less from the plant.
Significantly lower wholesale prices in Poland in the run-up to parliamentary elections in October have made imports from Germany uneconomical. At least one supplier moving product from PCK Schwedt has begun cutting diesel prices in a bid to win back Polish buyers.
This price gap between northern and eastern Germany is likely to widen further, because import costs into northern Germany will probably continue to rise. Reduced exports from Russia at a time of rising diesel demand in northwest Europe and low domestic supply could tighten diesel availability. It remains to be seen whether Germany can import enough winter diesel to prevent a supply shortage and if so, at what price. Some traders are therefore forecasting price increases at import locations across the country.
In Germany's southwest, prices are falling because high run rates at the 299,000 b/d Miro refinery in Karlsruhe are leading to an abundance of supply. But production is curtailed at the 207,000 b/d Bayernoil refinery in southern Germany: a leak at a desulphurisation unit at the plant's Neustadt site will not be repaired until 7 October; and a failure of the mild hydrocracker has further restricted production at the same site. This has significantly pushed up regional prices since the second week of September and the continuing repairs will most likely prolong the shortage throughout October, according to traders.
The variability in product availability could continue or even increase in coming weeks. The Elwis information service forecasts a decline in Rhine water levels below 100cm at the Kaub bottleneck by 6 October. As a result, barges passing Kaub on their journey along the Rhine will be restricted to under 40pc of their usual loading capacity. The Miro refinery could therefore struggle to shift enough product via barge, which would exacerbate a local product surplus.
Miro's consortium of operators is planning a partial shutdown from mid-October to the end of November, which is likely to curb supply and reduce price differences to neighbouring regions in the second half of this month.
