Strict lockdown restrictions have resulted in a sharp drop in diesel cargo flows into Germany this month, prompting a wave of exports from northwest Europe.
Vortexa data show German imports have averaged just 34,000 b/d across three cargoes so far in February. Imports last year averaged around 126,000 b/d. The crash in imports comes despite a rise in exports from Russia, northwest Europe's primary diesel supplier and typically a major exporter to Germany. Diesel exports from Russia are currently the highest in months, partly because of Russian government directives to ramp up refinery runs to boost gasoline supplies to the domestic market.
Germany's share of Russian diesel exports to northwest Europe stands at just 10pc in February to date, compared with 18pc in January and 25pc in December. France, which has seen some of the sharpest cuts to refinery throughput in Europe during the pandemic, has taken a 53pc share of Russia's diesel exports to northwest Europe so far this month, with the Netherlands receiving 15pc and the UK 14pc.
The lack of buying interest from Germany — which has received roughly a quarter of all Russian diesel cargo flows moving to northwest Europe over the last three years — has contributed to unusually high exports from the region in recent weeks. Northwest Europe has exported around 250,000 b/d of diesel and gasoil in February to date, not far below the multi-year high of 270,000 b/d in November.
Demand collapse
Germany's waning demand for imports not only stems from a slump in domestic diesel sales at the pump, but it also reflects a decline in purchases from the construction and agricultural sectors, which helped to prop up demand during the first lockdown last spring.
Average German weekly diesel delivery volumes submitted to Argus have almost halved this month compared with April last year and are 28pc lower than February 2020. Overall fuel sales at the pump were already down by as much as 40pc on the year in January, according to German retail station operators. And some companies expect demand to drop further this month after the government introduced mandatory working from home for office workers from the end of January and extended the latest domestic lockdown until the beginning of March.
The lack of inland demand is reflected in current upriver prices and has led to atypical barge flows down the Rhine in recent weeks. The premium of inland diesel to Amsterdam-Rotterdam-Antwerp (ARA) prices has dropped so low this year that it does not even cover the costs of Germany's greenhouse gas (GHG) quota of $90.21-95.94/t. The premium has averaged just $48.69/t since the beginning of the year, and as a result, a few diesel barges have been moving from inland Germany into ARA.
Weather-related disruptions have also weighed on inland imports. High water levels have made barge movements impossible on large sections of the upper and lower Rhine of late. Import destinations such as Cologne in western Germany were not accessible by ship for more than a week, nor were the Rhine-Main and southwest regions. This meant diesel barges from ARA could only be brought into the inland market via terminals further north along the lower Rhine such as Duisburg.
