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Shell, BP halt spot German diesel sales on scarcity fears

Commodities Mar 10, 2022 12:11PM ET
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2/2 © Reuters. A view shows a board with the logo of Shell at the company's fuel station near a business centre in Moscow, Russia March 9, 2022. REUTERS/Maxim Shemetov 2/2
 
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By Rowena Edwards and Julia Payne

LONDON (Reuters) - Oil majors BP (NYSE:BP) and Shell (LON:RDSa) have not offered spot diesel cargoes for sale on the German market for the last two weeks, for fear of a supply shortage, two traders said on Thursday.

Russia is a major diesel supplier to Europe and accounted for 58% of Europe's diesel and gasoil imports last year, analytics firm Vortexa said on Thursday.

Germany, where Russian fuel accounted for a ninth of its diesel needs last year, has supply for now, but Germany's fuels and energy association said on Thursday supplies of diesel and heating oil were becoming more scarce.

Global commodities trader Trafigura said the world's stocks of crude and diesel outside China were already low before Russia's invasion of Ukraine began on Feb. 24.

Two traders said for the last two weeks BP and Shell had held rather than offered cargoes for sale. They spoke on condition of anonymity because they were not authorised to speak to the press.

One said prices were extremely high and that Germany's diesel supplies were tight even without sanctions on Russian products, although there was no risk of scarcity yet.

A source close to Shell, also speaking on condition of anonymity, said the company had notified German customers to prepare them for reduced spot volumes of petrol, diesel, heating oil and lubricants.

Shell said on Tuesday it would immediately stop trading Russian crude and phase out other involvement in Russia after it faced a backlash over a purchase last week.

BP did not reply immediately to a request for comment.

SELF-SANCTIONING

The United States banned imports of Russian oil and gas on Tuesday, while Britain said it would phase out Russian oil by the year end and the European Union is working on reducing its reliance on Russian fuel.

European oil companies are self-sanctioning or avoiding Russian oil if possible, creating a chaotic market across crude and products.

While crude prices have traded at levels not seen since the 2008 economic crash, some products have hit records.

A third European diesel trader said some people were panic buying and others might be holding products as part of logistical strategies.

Robert Yawger at Mizuho bank said in a note gasoil (which can refer to diesel or heating oil) was becoming "a bit of a psychomarket", with low trading volumes.

"People generally avoid it but addicts (are) drawn to that kind of market like moths to flame."

In Sweden, traders also reported supplies under strain, which was making companies keep products even though the backwardated market structure, whereby the front month is more expensive than the following, should be an incentive to sell now and capitalise on high prices.

A Scandinavian distillates trader said a lot of requests were being received for diesel, including from Germany.

In France, petroleum association UFIP said there was no current domestic fuel shortage but wholesalers were nonetheless limiting sales, in some cases to 80% of the contracted total.

As backwardation ballooned to a record, the European benchmark price for a prompt tonne of diesel was on Wednesday $654 higher than for diesel in six months' time.

Shell, BP halt spot German diesel sales on scarcity fears
 

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