The amount of German winter diesel on offer at the Amsterdam-Rotterdam-Antwerp (ARA) hub has been shrinking and premiums for prompt delivery have soared, as disruption at German refineries has coincided with a seasonal transition to a specification that is more expensive to produce.
Traders said there is very little German winter diesel offered for prompt loading at the ARA hub. Mabanaft bought a German winter diesel barge for loading in five to nine days' time at a $40/t premium to Ice December gasoil on 15 November; in the same session BP paid a premium of only $23/t against the same futures for a barge loading in 11-15 days' time.
That suggests the market values six days' earlier loading at $17/t, or one day's earlier delivery at around $3/t at the promptest end of the forward curve. Spot barge premiums against Ice gasoil futures in the past year, adjusted for the number of days remaining until expiry, suggest the market has typically valued one day's earlier delivery at only around 30-40¢/t over the days or weeks remaining until expiry.
Market participants said the German winter diesel specification is trading around $5-7/t above the French or UK equivalents that put less-stringent requirements on several key properties. This is around double the premium it has attracted in the past, mainly because the most reliable supplier of the German winter product was now-sanctioned Russia.
Germany requires its winter specification from 1 November.
BP has cancelled some trucked diesel offers and barge diesel loadings at its 257,000 b/d Gelsenkirchen refinery in western Germany, for reasons that are unclear. Argus understands some diesel has been brought to Gelsenkirchen by barge from ARA to help maintain supply, which is probably sapping barge availability at the hub. Traders also point to problems with machinery at the 207,000 b/d Bayernoil refinery in southern Germany as contributing to tight diesel supply in the country.
Germany's peak summer refinery crude runs were around 200,000 b/d lower this year than last year, according to IEA data, because of accidental disruption and the challenges of changing crude slates.
Around 200,000t of Ice November gasoil futures were carried to physical delivery at the contract's expiry on 10 November, similar to October and around a third above the 2023 average. That amount of German winter diesel will need to be delivered into tanks, onto barges or onto 15,000t ships at ARA between today and the end of this month. Companies not taking physical delivery of futures may now find less diesel offered in the spot barge market.
German diesel barges have steadily extended their premium over North Sea Dated crude in the past week, to $31.14/bl on 15 November from $26.64/bl on the day before the futures' expiry.
Rising premiums for prompt diesel at ARA have not helped arbitrage economics for transatlantic imports, and the cost of clean-products freight from the US to northwest Europe has rocketed at the same time. A 40,000t cargo on the route costs around $37/t, according to Argus assessments, nearly double the average in October. The US and India stand out among the EU's external diesel suppliers as being capable of reliably producing German winter diesel.
