Tuesday, November 28

Gasoil storage rates in Europe’s ARA hub hit record lows – Kulsen

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AMSTERDAM — Rates to store gasoil in the Amsterdam-Rotterdam-Antwerp trading hub have hit historic lows of 1.50-2.00 euros per cubic meter each month, Insights Global’s Patrick Kulsen told Reuters at a conference in Amsterdam on Tuesday.

Gasoil stocks include diesel and heating oil. Europe is facing the prospect of a diesel supply shortage as sanctions on Russia, Europe’s largest supplier of diesel and related fuels, have compounded an already tight situation.

Limited availability has pushed European diesel’s six-month spread steep into backwardation, with the spread reaching record highs earlier this month.

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Backwardation means that prompt prices are higher than future contract prices, reflecting near-term demand that encourages traders to release oil from storage to sell it.

The market structure has forced storage firms to offer lower rates to encourage business, industry sources told Reuters on the sidelines of the S&P Global Platts European Oil & Energy Storage Conference in Amsterdam.

Companies are facing further pressure from upcoming new storage capacity. The HES Hartel Tank Terminal, developed at Maasvlakte in the port of Rotterdam, is on track to be operational this year, Dutch tank terminal firm HES International told Reuters on Tuesday.

The terminal will offer 1.3 million cubic meters of storage capacity for gasoline, diesel, gasoil, jet fuel and biofuels.

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BP is connecting to the new terminal by pipeline from its 377,000 barrel per day (bpd) Rotterdam refinery, which will reduce BP’s demand for storage facilities elsewhere, industry sources said.

However, storage companies at the conference said interest in keeping product in inventories to benefit from a contango market only makes up a small part of their business. Contango is where the futures price of a commodity is higher than the spot price, and can encourage firms to store product.

“Most of the storage we have around the world, its main function isn’t for storing for contango but to correct imbalances to enable flows to where we have deficits,” said Jared Pearl, chief commercial officer at VTTI, whose owners include Vitol and ADNOC.

The firms added that the current volatility in oil prices increases the need to store oil and manage market uncertainty.

“There’s no doubt volatility is a friend to some and foe to others but that’s what brings the interest to our business,” said Ellen Ruhotas, managing director at Zenith Terminals.

(Reporting by Rowena Edwards; Editing by Mark Potter and Mark Porter)