German diesel demand on the rise as supply drops

Activity on German waterways increased at the beginning of March as diesel demand rises, while outages at two key refineries are weakening supply.

Traded diesel volumes reported to Argus in February were around 60pc higher than in January. Traders expect demand to rise even further in March, as agriculture and construction will need more supply when temperatures become more favourable. Import demand is also likely to increase further in the coming weeks.

This is reflected in an uptick of demand for shipping space at the beginning of March, which German shipowners said was driven by exports from Germany to the trading hub at Amsterdam-Rotterdam-Antwerp (ARA) and by the domestic redistribution of products.

Increased shipping activity is in part driven by two recent plant outages. Production at the PCK consortium's 226,000 b/d Schwedt refinery was limited after a crude distillation unit shut down on 2 March, and an unplanned outage of a desulphurisation unit at Shells' 147,000 b/d Wesseling refinery is limiting diesel supply. This is forcing some market participants to reroute product flows.

But overall demand for imported diesel remains low. Importers say they do not expect a significant increase until the end of March or beginning of April. Planned maintenance at the 120,000 b/d Vohburg section of Bayernoil's 207,000 b/d Neustadt-Vohburg refinery and at Miro's 310,000 b/d Karlsruhe plant could then provide additional support for import demand.

In the longer term, BP plans to downgrade crude processing capacity by a third at its 257,000 b/d Gelsenkirchen refinery in order to reduce the sites' carbon footprint. Coupled with the planned end of crude processing at Wesseling by early 2025, this could increase the need for imports from ARA along the Rhine river.

By Johannes Guhlke