German heating oil, diesel and E5 gasoline demand has risen so far in August despite wide variation in prices and sales by region.
On average, heating oil volumes have more than doubled during the month compared to July, while diesel and gasoline sales are up by around 20pc and 16pc. But in some areas sales volumes dropped sharply as a result of a growing price gap between regions. Some refineries, especially in southwest Germany, are oversupplied toward the end of the month, which is pushing prices down.
As a result, traders are buying fuel in cheaper neighbouring regions, causing sales to rise in some places and fall in others. For example, fuel sales are up in the southwest but down in the south. Heating oil is seeing the opposite trend — sales in south Germany have nearly quadrupled thanks to higher supply and lower prices.
At the same time, Germany's fuel supply and demand are becoming disconnected from Amsterdam-Rotterdam-Antwerp (ARA). Importing diesel from ARA to Germany via the Rhine has become less profitable in August. Because of this, German importers are relying more on local refineries instead of buying extra diesel from ARA. Shipping companies also report fewer orders for Rhine imports.
The main reason imports are less attractive is that German refineries are producing plenty of fuel, while demand is still relatively weak. This causes prices in Germany to fall faster and rise more slowly than in ARA. For example, while diesel futures dropped by €5.20/100l in ARA, the average price in Germany fell by €6.10/100l.
Recently, diesel futures have started to rise again. This is because the market expects less diesel to be available in Europe. Russia is cutting back on diesel exports due to ongoing attacks on its refineries and is focusing more on its own supply. This means less diesel is being shipped to Turkey, which could lead to fewer deliveries from Turkey to Europe and higher prices. However, while futures rose by €1.70/100l, the average price in Germany only went up by €1.14/100l.
Another hurdle for imports is the rise in shipping costs. In early August, freight rates for barges from ARA to parts of Germany went up, especially to areas along the Main and Upper Rhine. This was mostly due to low water levels at Kaub, which limited how much ships could carry. Fortunately, water levels are expected to rise again by the start of calendar week 35, and freight rates have already started to drop as of 21 August.
