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European diesel surges after fire at Pernis refinery cuts supply
[LONDON] European diesel surged after a fire at the region's biggest refinery on Saturday left traders scrambling for supply in the area's main oil-trading hub.
The fire at Royal Dutch Shell's Pernis site led to the halt of most units late Saturday and the company doesn't expect any of the units to restart Monday.
PVM Oil Associates said traders were "panic buying" gasoil contracts early Monday while a Bloomberg survey showed the disruption could spur increased flows of diesel from Asia.
Europe's diesel market has tightened in recent weeks following disruption at Total SA's Leuna refinery in Germany, which left some retail stations without fuel in the Leipzig area.
Inventories held in independent storage have fallen counter-seasonally this month, the biggest drop for any July in 6 years, PJK data show.
Pernis is "accelerating the pace of the tightening" of the diesel market, Petromatrix managing director Olivier Jakob said by phone.
ICE gasoil for August delivery surged as much as US$17.25 to US$502.25 a ton, the highest since April 19 and traded up US$5 at US$490 at midday London time.
August futures are now trading at a premium to the September contract, a structure known as backwardation which signals near-term tightening in supply.
Pernis can process just over 400,000 barrels of crude a day, making it the largest facility in Europe.
This map shows global refineries with capacity of at least 400,000 barrels a day.
The shutdown could "lead to the opening of the arbitrage window from Asia to Europe," said Ehsan Ul-Haq, an analyst at researcher Resource Economist, using the industry term for flows of fuels from one region to another based on price differences.
"Although global diesel supply is more than adequate to meet present demand, regional bottlenecks on this continent are likely to result in higher middle distillate prices and cracks in the Atlantic Basin," Mr Ul-Haq said.
Refiners don't typically schedule maintenance for summer when demand for gasoline peaks.
While Total's Leuna has restarted, Hellenic Petroleum's Elefsina plant is offline for work.