Saturday, October 20, 2012

European Fuel Shortages

This may seem  like a parochial little issue but there are fears that this winter may see huge problems in fuel deliveries across Europe. Just to add to their miseries.

Edinburgh airport said jet fuel supplies were being rationed on Tuesday because of a glitch discovered last week at a Scottish refinery owned by Ineos INEOSG.UL, a further sign Europe could be heading towards a supply crunch this winter.

Refinery maintenance and closures both in Europe and the U.S. is limiting the availability of oil products, making retailers and other consumers vulnerable to supply shocks.

A similar shortfall in wholesale oil product supplies in California had motorists gasping at record $5 a gallon prices at the pump earlier this month.

The Grangemouth refinery halted supplies of jet fuel to Scottish airports last week, forcing them to rely on contingency stocks to avoid cancelling flights.

"There has been a shortage of aircraft fuel across Scottish airports caused by quality issues at Petroineos' Grangemouth refinery which has meant we have had to ration our supplies" Edinburgh airport said in a statement, adding it was still rationing fuel.

PetroIneos Trading is a joint venture between Petrochina and Ineos to supply crude to Ineos refineries in France and Scotland and market their fuel.

Elsewhere in Scotland, Glasgow airport said it had been able to maintain its flight schedule by using stocks held on site.

Fuel was still being rationed at Edinburgh airport on Tuesday, despite Ineos resolving the glitch at the refinery and restarting deliveries to Scottish airports on Monday.

Analysts say supply problems could become the norm this winter as inventories are low and there are fewer refineries operating in Europe and the U.S. than a year ago.

Earlier this month, a spike in California gasoline wholesale prices caused by shortages forced petrol stations to shut. Wholesale prices of distillate products like heating oil are already significantly higher in the region than a year ago, indicating distillate markets could be hit by similar supply problems.

Stocks are typically built up ahead of the winter, but are low this year because of a backwardated market structure which makes it expensive to hold product in storage. This is because product prices in a backwardated market fall further ahead, and are most expensive in the near term.

Distillate product stocks held in Europe's Amsterdam-Rotterdam-Antwerp were at the lowest since January on Thursday, while inventories in the U.S. have also fallen more sharply than expected.

High and volatile oil prices have also contributed to reluctance to build up storage supplies either side of the Atlantic.

No comments: