Shell and BP halt German diesel sales for fear of shortages

LONDON, March 10 (Reuters) – Oil majors BP and Shell have not offered spot cargoes of diesel for sale on the German market in the past two weeks over fears of a supply shortage, said two traders on Thursday.

Russia is a major supplier of diesel to Europe and accounted for 58% of European diesel and gas oil imports last year, analyst firm Vortexa said on Thursday.

Germany, where Russian fuel accounted for a ninth of its diesel needs last year, has a supply for now, but the German Fuel and Energy Association said on Thursday that diesel supplies and fuel oil were becoming scarce.

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Global commodities trader Trafigura said global crude and diesel stocks outside China were already low before the start of Russia’s invasion of Ukraine on February 24.

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

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

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

Shell said on Tuesday it would immediately cease trading in Russian crude and phase out any further involvement in Russia after suffering a backlash over a purchase last week. Read more

BP did not immediately respond to a request for comment.

SELF-SANCTION

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

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

While crude prices traded at levels not seen since the economic crash of 2008, some commodities hit record highs.

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

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

“People usually avoid it, but drug addicts (are) drawn to this kind of market like moths.”

In Sweden, traders also reported tight supplies, forcing companies to hold on to products even though the retrograde market structure, where the first month is more expensive than the next, should be an incentive to sell now and take advantage of high prices.

A Scandinavian distillate trader said many requests for diesel were being received, especially from Germany.

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

As the discount hit a record high, the European benchmark price for a fast ton of diesel was $654 higher on Wednesday than diesel is six months from now. Read more

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Reporting by Julia Payne and Rowena Edwards in London Additional reporting by Shariq Khan in Bangalore, Ahmad Ghaddar in London, Benjamin Mallet in Paris and Christoph Steitz in Frankfurt Editing by David Goodman, Barbara Lewis, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

James R. Rhodes