Diesel storage in Scandinavian caverns unwinding

LONDON: Diesel and gasoil storage in Scandinavian caverns and tanks is unwinding after hitting a record at the height of lockdowns in Europe that slashed demand for the fuels last year, data from oil analytics firm Vortexa shows.

A record 1.6 million tonnes of diesel/gasoil arrived at ports across Sweden, Norway and Finland from outside the Scandinavian region in Q2 2020, indicating discharge into unusual storage sites, including to oil cavern storage, Vortexa said.

This compares with 180,000 tonnes of diesel/gasoil that arrived over the whole of 2019 into the same ports.

About 80% of these arrivals originated from ports in Russia, they said.

The data covers 11 ports, at least six of which are linked to oil cavern storage.

Re-export activity from these ports began to pick up this year, with 130,000 tonnes leaving to outside the Scandinavian region in the first two months of the year, compared with under 12,000 tonnes over July-December 2020, Vortexa said.

March exports so far stand at 260,000 tonnes, indicating exports in Q1 2021 are so far equivalent to around a quarter of the volumes imported into these ports in Q2 2020, Vortexa said.

The de-stocking could be due in part to the diesel market structure.

In Europe, the six-month diesel spread reached $8 a tonne on Feb. 19 in its biggest backwardation in 13 months, Refinitiv data showed.

Backwardation, where spot prices are higher than for later delivery, encourages traders to draw down oil supplies and sell promptly.

The spread has slipped into contango again, where the front month is trading at a discount to future months.