Oversupply from German refineries dampened domestic price hikes linked to a rise in Ice gasoil futures as market participants feared supply disruption in northwest Europe.
Product demand in Germany remained seasonally low in the week ending 9 February, according to traders with activity typically thin. Industrial diesel stocks and consumer heating oil stocks are on par with February stocks in recent years.
Persistently low truck mileage in Germany is also reducing diesel demand at petrol stations and from wholesalers. According to the Federal Environment Agency (UBA), around 50pc of diesel demand in Germany comes from road haulage. Low industrial performance in particular is putting pressure on truck mileage, as only rising domestic production generates increased transport activity. In December, the German manufacturing index declined by 3.9pc on the year and came 1.5pc below November figures.
Low demand paired with virtually unrestricted production is causing continued oversupply at the 310,000 b/d Miro and 226,000 b/d PCK refineries. Both are operating at high capacity and hence are currently supplying more product than there is demand in the market. This is reflected in what shipping operators are telling Argus: There are currently hardly any requests for prompt shipping space to import products, but mainly bookings for exports to get rid of surplus product.
Normally, diesel or heating oil values fall when supply exceeds demand. Recently, however, prices have risen instead. In the past week, diesel was traded around €5/100l higher than at the beginning of January. In the same period, Ice gasoil futures rose by around €10/100l and are now at their highest since October, mainly because of supply concerns in Europe linked to ongoing attacks in the Red Sea and the beginning of refinery maintenance season. The comparatively slower price increase in Germany is emblematic of the dampening effect of oversupply on domestic price hikes.
