reu-2018-11-09 fuel supply deficit Europe
https://www.reuters.com/article/us-asia-gasoil-europe/butterfly-effect-low-eu-river-stirs-market-10000-km-away-in-singapore-idUSKCN1NE0J2?il=0
Butterfly effect: Low EU river stirs market 10,000 km away in Singapore
Koustav Samanta
SINGAPORE (Reuters) - Low water levels on the Rhine river have caused a
fuel supply deficit in parts of Europe's industrial heartlands that is
sucking up cargoes from more than 10,000 km away in Singapore.
FILE PHOTO: A couple sit on their camping chairs and look at Lorchhausen
amid the river bed of the dried out Rhine, as water levels reached a
historic low level and freight vessels cannot sail fully loaded on
Europe's most important waterways, near Bacharach, Germany, October 19,
2018. REUTERS/Wolfgang Rattay/File Photo
Following a long, scorching summer, water levels on the Rhine - a key
commodity shipping lane connecting industrial centers in Switzerland,
Germany, France and the Netherlands to major seaports - fell to record
lows, limiting the transport of coal, steel, grains and fuel.
That has created a shortage of heating oil heading into the European
winter, pushing up the market and triggering a search for supplies from
as far away as Southeast Asia, where there is ample fuel and gasoil
prices are low.
Northwest European prices for gasoil hit a record $35-per-ton premium
over Singapore values LGOAEFSMc1 for November fuel deliveries, and
December premiums are still above $20 a ton. That means gasoil could be
pulled into Europe from Southeast Asia via arbitrage trades through the
end of the year.
"The wide arb means it's possible to shift gasoil to the West (Europe) at
a profit," said Sukrit Vijayakar, director of Indian energy consultancy
Trifecta, adding that the situation stemmed from the low Rhine water
levels and Asian refineries coming out of turnarounds.
The arbitrage to Europe from Asia is usually workable when the price
spread is at least $15-$18 a ton. Many Asian refineries have just come
out of maintenance, or turnarounds, increasing the region's availability
of fuels like gasoil.
Gasoil inventories held in the Amsterdam-Rotterdam-Antwerp (ARA) refining
and storage hub STK-GO-ARA fell for the fourth straight week to 2.4
million tons, the lowest volume since mid-July this year, according to
data from Dutch consultancy PJK International.
By refilling ARA stocks with gasoil, including from Asia, traders said
they hope to be able to ship gasoil up the river as soon as water levels
recover.
Europe typically starts to stockpile gasoil, which is used for heating in
the region, ahead of the cold winter months.
Asian refiners, though, must act fast to serve the European demand
window, as American and also Russian suppliers are also eying the
opportunity.
"Comparing Asian refiners with their U.S. counterparts, the latter stand
a better chance to go to Europe as freight rates are cheaper and the
voyage time is very much shorter," one trader in Singapore said,
declining to be named as she was not allowed to talk in public about
commercial operations.
Despite America's advantage over Asia to supply Europe, ship tracking
data in Refinitiv Eikon shows one tanker, the Diva, carrying gasoil from
Southeast Asia to Europe.
The 37,000 ton tanker is currently in the Mediterranean and expected to
arrive at Antwerp on Nov. 16.
"If this arb window stays open, I'd expect more such routes to be fixed
next week," said a Singapore-based tanker charterer, also declining to be
named.
Reporting by Koustav Samanta in SINGAPORE; Additional reporting by Ron Bousso in LONDON; Editing by Henning Gloystein and Tom Hogue