Rotterdam oil storage takes a dive from flat consumption
Independent oil storage operators in Rotterdam are facing adverse trends while Antwerp volumes are up
The past two years have not been good ones for the independent storage operators of Rotterdam, by far the largest of the Amsterdam-Rotterdam-Antwerp (ARA) oil gateways to Europe. Flat consumption and low refining margins have trimmed the logistical flows through the port, while backwardation in refined product prices – futures prices lower than prompt – has caused speculative storage to evaporate.
Earlier, the ARA ports had been benefiting from the growth in long-distance oil supply, with products coming in from the new refineries of Asia and other products going out to Asia’s consuming countries. But Asia’s lower consumption-growth has taken the edge off that trade, and increases in terminal capacity in Europe have provided more competition.
Port statistics provide the evidence. Oil movements through Rotterdam – imports and exports of crude and refined products – reached a peak in 2012, of 180.1 million tonnes, but declined by 4.2% in 2013, to 172.7m tonnes (see Table 1). The decline continued in 2014: over the first nine months, movements were down by 4.1%, compared with the same period the previous year, to 126.4m tonnes.
While lower crude oil movements were responsible for most of the decline in 2013 (see Figure 1), the January-September 2014 decline was due to reduced flows of refined products. The volume of refined products moving through the port totalled 55.1m tonnes over the first nine months, 11.0% down compared with the same period in 2013. Port of Rotterdam Authority attributes the fall to reduced exports of fuel oil to Asia. Amsterdam, where gasoline is the speciality, also saw a reduction in oil movements in 2013 compared with the previous year, but 2014 produced a recovery. Movements in the first nine months totalled 30.2m tonnes, an increase of 3.7% over the same months of 2013. Of the 30.2m tonnes, gasoline accounted for 19.5m tonnes.
Antwerp oil movements have been growing strongly – by more than half over the past few years, from 29.7m tonnes in 2010 to 47.8m tonnes in 2013. The growth continued in the first nine months of 2014, with a 4.4% rise in movements to 37.3m tonnes.
Antwerp’s strong refining operations are the explanation. ExxonMobil and Total, owners of the two largest Antwerp refineries, are carrying out investment projects while trading company Gunvor, owner of the Independent Belgian Refinery since early-2012, is working the facility and its storage capacity hard.
Figure 1 - Oil movements through Rotterdam
The specialist gasoline terminals are particularly pained by decline in the worldwide gasoline market of recent years. The rise of US shale oil is the explanation: with crude exports heavily restricted, US refineries are running at high utilisation and the need for gasoline imports – which had been driving world trade – has shrunk drastically. US imports of finished motor gasoline and motor gasoline blending components (from all sources) together ran at more than 1.1m barrels a day (b/d) over the years 2005-2009, but have declined every year since then. In 2013, they averaged 641,000 b/d.
Over the peak gasoline months of 2014 – April to August – terminals in the Netherlands sent 53,400 b/d of finished gasoline and blending components to the US, according to US Energy Information Administration statistics. The flow was only a third of that in the same months of 2006, but it was an improvement on the 50,900 b/d of the same period in 2013. The flow from Antwerp declined from 18,700 b/d for April-August 2013 to 15,800 b/d for the same months of 2014.
Amsterdam leads in the gasoline trade – and claims to be the world’s largest gasoline port, with product flowing in from refineries in Rotterdam and the UK and elsewhere, and flowing out, after blending and load-building, to long-distance destinations. Oiltanking is the largest operator, with 1.576m cubic metres (cm) of capacity at its Westpoort terminal.
An Oiltanking executive says throughput of gasoline is lower than a year previously, when it was lower that the year before that. But the decline in exports to the US has partially been countered by flows to other destinations. “Volumes which once went to the US now go to South America, Africa and China”, he said – the latter a new destination for significant deliveries of gasoline from Amsterdam.
For gasoil, Oiltanking says volumes are slightly down but business is stable – and some say that price contangoes could attract more product into tanks over the coming months. Gasoil mostly comes from Russia, but deliveries from the US – another result of the shale-oil boom – are rising, Oiltanking says. Gasoil volumes vary monthly, with April and June seeing particularly large volumes in 2014.
ARA fee indications
Generally there is spare capacity in the independent storage terminals of the Amsterdam-Rotterdam-Antwerp (ARA) area, so fees have a downside. In Rotterdam, where a greater proportion of storage capacity is linked to speculative trading use than is the case in Amsterdam and Antwerp, the downward pressures are greatest. In Amsterdam and Antwerp there is a greater proportion of logistical users, so flows continue.
But, after two years in which refined product prices were predominantly in backwardation – futures prices lower than prompt – in November there were hints of a change. As lower crude oil prices worked their way through into prompt prices for refined products, some futures prices made small moves into contango – futures higher than prompt. That gives terminal operators hope for a return to conditions favouring speculative storage.
Meanwhile there is unused capacity, particularly for middle distillates, and fee negotiations tend to explore the downside. In November, according to Petroleum Economist’s discussions with terminal operators and larger users, middle distillates capacity was renting at about €2.50 ($3.13) a cubic metre (cm) a month – unchanged from a year previously. But while, a year previously, there were hints that a user wanting a large volume of capacity could secure it for as little as €2.00/cm, in November that appeared less likely.
For low-flashpoint capacity, in November users were paying about €3.00/cm – little changed from a year previously. But fees in Amsterdam extended to €3.30/cm, driven by the attractions of Amsterdam operations. With numerous cargoes moving through the port, and the availability of bio-components from various sources, gasoline cargoes can be blended to different national specifications for export.
Fees for Rotterdam fuel oil storage have declined from a year previously, reflecting the reduction in the export business to Asia and the resulting unused capacity. In November, Rotterdam fuel oil capacity was attracting €3.50-€4.00/cm – down from our assessment of €3.75-€4.25/cm a year previously. In Antwerp, fuel oil storage was attracting €3.25/cm in November, and lower fees were available outside the ARA hub.
But logistics are particularly important for fuel oil storage. Exports to Asia often travel in tankers of very large crude carrier (VLCC) size, so terminals capable of accepting large vessels, and loading them quickly, can attract fees at the upper point of the range. Fuel oil is the most costly product for the terminal to handle, with steam-heating required and tanks and pipes needing frequent cleaning.
Fees are monthly and include one fill and discharge per month.