September 10, 2020 – Oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose this week, rebounding from the five-month lows recorded a week earlier.

Overall oil product inventories had been falling consistently since reaching 17-year highs in mid-June, but a sharp rise during the week to yesterday bucked the long-term trend. Stocks rose sharply following the onset of the Covid-19 pandemic as demand for fuels fell heavily, but inventories gradually fell throughout the summer as demand started to recover. The reimposition of lockdown measures in some key markets east of Suez, and a rise in Russian exports, have since attracted a wave of middle distillates into northwest Europe.

Gasoil stocks rose on the week as a result, the highest weekly percentage rise since Argus began recording the relevant data in January 2011. Burgeoning supply brought diesel refining margins to their lowest since 2002 on 9 September. The rise in land-based stocks was supported by the discharging in the ARA area of tankers that have been used as floating storage on the North Sea. Tankers also arrived from Russia and the US. Flows of gasoil from the ARA area up the river Rhine rose to eight-week highs, but remained down on the year.

Fuel oil stocks also rose sharply on the week. Tankers departed for the Mediterranean and west Africa but with relatively small cargoes on board, while tankers arrived in the area from the Baltics, France, Poland and Russia. Consumption of marine fuels is under downward pressure from the loss of custom from cruise ships this year caused by the Covid-19 pandemic. Saras chief executive Dario Scaffardi said at the company’s second-quarter results that cruise ships account for around 7-9pc of the company’s marine fuel sales.

Jet fuel stocks rose, remaining close to the all-time record high levels recorded during August. The end of peak summer demand season and the reimposition of some Covid-19 restrictions within Europe weighed heavily on demand. IAG — owner of British Airways, Aer Lingus and Iberia — is the latest airline group to adjust its plans to absorb the impact of current travel restrictions and quarantine measures on booking activity. It said today that it now expects capacity in the third quarter to be below 2019 levels, compared with previous guidance of a decline. A tanker arrived from the UAE, while jet fuel cargoes left the area for the UK and Ireland.

Stocks of gasoline and naphtha both fell, reflecting a recent increase in gasoline outflows from the region. Gasoline stocks fell, with tankers departing for the US, west Africa, Canada, Mexico and the Mediterranean. The volume of gasoline moving around the ARA area on barges also rose on the week. Cargoes arrived from Finland, France, Norway and the UK. Butane prices rose as demand from gasoline blenders increased ahead of the switch to winter grade gasoline, which has lower evaporability specifications than summer grade and can therefore contain a higher proportion of lighter oil products.

Flows of LPG up the river Rhine rose on the week as a result, as did flows of naphtha, which is a key blending component year-round. Overall naphtha stocks fell, partially as a result of the rise in Rhine flows. The relatively low volume of naphtha arriving on seagoing tankers also contributed to the stock draw. Tankers arrived from Algeria, Russia and the UK but in below average quantities.

Reporter: Thomas Warner