NWE diesel barge price dives at quickest since March

Prices for diesel barges at the northwest European hub of Amsterdam-Rotterdam-Antwerp (ARA) dropped by $91.50/t on 31 October, the largest day-on-day change in the 19-year history of the assessment barring a period of extraordinary volatility in March.

The drop may partly reflect the gradual return of French refining operations after strikes, but the sheer volatility is more notable than the price fall itself. The barges are still pricing more than $60/bl above North Sea Dated crude — which until recently would have been the highest spread ever — and the outright barge price is around $140/t higher than a month ago.

The volatility is probably because of the diminished state of diesel inventories in northwest Europe. Increasingly, buyers in need of diesel cannot take their time finding a favourable price, because they have too little in their tanks to fulfil their onward contracts.

Mabanaft and Reliance bought four barges between them on 28 October, from Trafigura and Van Raak, at a volume-weighted average premium of $109/t to Ice November gasoil. But on 31 October a flurry of selling interest at far lower levels — Vitol offered a barge loading 11-15 days away at a $51/t premium to Ice November gasoil, and Trafigura offered one for loading 3-7 days away at a $58/t premium to the same contract — met with no buyers and so the price support vanished.

The state of northwest European diesel inventories can be seen in official Dutch data, which show stocks at less than 60pc of year-ago levels in August. A combination of uncertainty about Russian supply and a network of unusual costs and restrictions to European oil refining have incentivised traders to deplete storage heavily since late 2021.

Argus assessed the diesel barge differential against front-month Ice gasoil futures lower by $58.25/t on 31 October than on 28 October, the largest ever day-on-day change in the differential to a single futures contract. The assessed differential has occasionally this year moved by more when the front-month has expired at a high premium to the second-month.

European diesel markets are drifting again towards the levels of volatility seen in the weeks immediately following the Russian invasion of Ukraine, which were themselves unprecedented at that time. The price move on 31 October was beaten only by six days between 4 March and 21 March this year. The price moved by almost $500/t the day after expiry of the March gasoil futures, which reflected extreme uncertainty about prompt supply as the reaction of European policymakers to the Russian invasion of Ukraine was still very opaque.

By Benedict George