Rhine flooding affecting German storage facilities

High water levels on the Rhine river in Germany are beginning to reduce supplies at storage facilities as barge movements are restricted. Barge traffic is likely to be halted south of Cologne this weekend, which could widen spot price differentials between refineries and import locations.

Further south in Switzerland, the Rhine was closed to barges at Basle today after water levels there increased by almost 2m since yesterday. Parts of the Main, Moselle and Neckar rivers — all Rhine tributaries — have been closed for shipping, as have parts of the Danube.

Even in parts where shipping has not yet been halted, rising water levels are forcing depots to close. A storage depot at Deggendorf, on the Danube in southern Germany, was shut at noon local time today. A Rhine depot at Duisburg that stores gasoil, gasoline and biofuels expects to close tomorrow because it will likely be partially flooded; another storing heating oil, diesel and gasoline in Cologne has been unable to receive barges since 3 December and is likely to run dry by early next week if water levels do not recede.

The flooding could reduce product availability at other storage depots, although widespread shortages are unlikely because demand is low, especially for middle distillates. Heating oil prices are higher than at any point in 2017, and diesel use is seasonally low after the holidays.

Gasoil barge flows from the Amsterdam-Rotterdam-Antwerp (ARA) hub into Germany were substantially below average during the past week, according to PJK International, while exports of gasoline to ARA from the hinterland reached a seven-week-high. Flows in both directions could be heavily reduced this week by the shipping restrictions.

Reduced export opportunities via barge could pressure prices at refineries such as the 301,000 b/d Miro refinery in Karlsruhe and Shell's 310,000 b/d Rheinland refinery complex just south of Cologne, which rely on exporting along the river to storage locations in Germany and in ARA.

Barge freight rates dropped yesterday, and rates from ARA to Germany are 25-30pc below the yearly average for 2017.

The effect of the restrictions on the NWE product markets is limited so far. Barges of Eurobob oxy gasoline were trading at a discount to February Eurobob oxy swaps on 4-5 January in ARA, as traders don't expect the restrictions to last more than a few days. Several refineries along the river are major suppliers of gasoline to ARA. On the gasoil side, traders appear unmoved by the prospect of lower import volumes from ARA because of weak inland demand.

Neither do gasoil importers expect a shortage of rail cars, which are typically used as an alternative to barges, but supply could tighten if water levels keep rising over the weekend as forecast.

The high water levels are not yet likely to have any drastic effect on the LPG market. Propane demand for heating is relatively low as temperatures remain mild. If high water levels persist, this could potentially put added pressure onto existing low railcar availability and push freight rates higher.