Middle distillate trade in Germany picked up last week as the availability of product in the west and south of the country continued recovering, market participants caught up on missed volumes from previous weeks and a drop in temperatures boosted demand for heating oil.
Bayernoil continued to increase spot supplies from its 207,000 b/d Neustadt-Vohburg refinery in Bavaria after restarting a hydrocracker and a desulphurisation unit last month. Traded diesel volumes reported to Argus in Germany's southern region doubled week on week.
In the Cologne Lowland region, diesel sales rose threefold compared with the previous week, and in the Rhine-Main region, they were up by a quarter. A key supplier to both regions resumed spot diesel sales on 27 November after suspending offers for more than a month.
The rise in domestic supply has cut demand for imports into northern Germany, highlighted by a drop of around $10/t in the premium for diesel cif Hamburg against Ice gasoil futures in the last two weeks.
As well as increased availability, domestic heating oil demand is being bolstered by low temperatures, which were around 5°C below the 10-year average for Germany over the past week, according to information service Speedwell Weather. Germany's average weekly traded heating oil volumes reported to Argus hit a seven-week high last week, up by almost two-thirds compared with the previous week and nearly 10pc higher year on year
Demand is poised to stay strong throughout December as market participants stock up ahead of tax hikes in January. At the turn of the year, the German government plans to increase its CO2 tax to €40/tCO2e from €30/tCO2e to €40/tCO2e, and the GHG quota will rise to 9.25pc from 8pc. According to Argus calculations, the CO2 tax rise will add just under €2.50/100 litres to the price of oil products while the GHG quota will push up the price of diesel and gasoline by an additional €1/100l.
