“Stock-Outs” Begin: Austrian Energy Giant Limits Diesel Spot Sales Until Further Notice
Earlier this week, we quoted the heads of some of the world’s biggest independent energy trades, who spoke at the FT Commodities Global Summit in Lausanne, Switzerland and unveiled a dire forecast for the diesel market: “The thing that everybody’s concerned about will be diesel supplies. Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East,” said Russell Hardy, chief of Switzerland-based oil trader Vitol. “That systemic shortfall of diesel is there.”
As a reminder, Russian supplies account for about 15% of Europe’s diesel consumption, according to the FT which carried their comments.
Hardy said the shift to more diesel consumption over gasoline in Europe had helped to create shortages of the fuel. He added that refineries could boost their diesel output in response to higher prices at the expense of other oil-derived products to shore up supply, but warned that rationing was a possibility.
Meanwhile, Torbjorn Tornqvist, co-founder and chair of Geneva-headquartered Gunvor Group said that “Europe is short of diesel” but added that “Diesel is not just a European problem; this is a global problem. It really is.”
Tornqvist also warned that European gas markets were no longer functioning properly as traders faced huge demands from banks for cash to cover hedging positions. “I think it’s broken. It really is,” he said. “I never thought that somebody could say ‘ah, gas has fallen below 100 per megawatt hours is really cheap’.”
Finally, the CEO of Trafigura Jeremy Weir, which has recently fielded billions in margin calls and has warned that commodity trading houses risk imploding absent a central bank bailout, put the final nail in the coffin warning that “the diesel market is extremely tight. It’s going to get tighter and will probably lead into stock outs” referring to when fuel stations run dry.
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