Germany's distillate supply is falling on the back of mounting problems at Bavaria's 207,000 b/d Bayernoil refinery and the ongoing scheduled shutdowns of two other refineries. But Rhine water levels are expected to rise towards the end of the week, allowing traders to import more product by barge.
The Bayernoil refinery's distillate production is currently restricted after stakeholders reported two damaged units over the course of a week. A leak at a catalytic desulphurisation unit has reduced production by about 5pc since 12 September, according to a stakeholder.
Production was then further restricted on 14 September by an unplanned outage of a mild hydrocracker. Both defects occurred at the refinery's Neustadt site.
Distillate prices in the south of Germany could rise because of the reduced supply in the region. Prices in Bavaria have been well below the national average since the end of August because of mounting oversupply caused by the refinery producing at capacity for several weeks. The price spread for heating oil and diesel across different regions of Germany, which hit almost €5/100l and €6/100l, respectively, last week, could narrow if the problems continue.
These problems come as Germany's refinery runs are already reduced because of ongoing seasonal maintenance. Tamoil's 103,000 b/d Hamburg refinery and BP's 256,000 b/d Gelsenkirchen refinery are undergoing scheduled maintenance until the end of October.
Traders have not reported any shortages since the start of the maintenance season in August. And additional distillate imports via the Rhine could counteract the possibility of a shortfall. Rhine water levels are expected to rise this week and allow barges to carry at full capacity again. Lower water last week cut capacity to just 45pc.
Lower demand could also lessen the impact of the missing production volumes. Distillate demand fell last week, according to traders, because consumers were hoping prices would drop. Heating oil and diesel last week were up by €4.50/100l and €3.70/100l, respectively, compared with the week before.
This move tracked the sharp price increase in Ice gasoil futures, which followed crude's upward trend, jumping to above $1,000/t for the first time since January a week ago.
