Drought on the Danube Blocks Fuel Deliveries in Central Europe
Prolonged heatwave conditions in Central Europe and persistent low rainfall have caused water levels on the Danube river to reach critically low levels, causing multiple points on the waterway to become unnavigable for fuel deliveries.
At Budapest, Hungary’s General Directorate of Water Management (OVF) recorded levels of just 19 centimeters on Wednesday, precluding any vessels from passing through. According to OVF data this is a record low, beating a mark of 33cm registered in 2018.
For context, current levels at Budapest are far below the August multi-year average of 270-300 cm.
Similarly, access via the river from the Romanian seaport of Constanta into the Ukrainian border city of Izmail is blocked. This channel represents a critical juncture for refined fuels heading towards Ukraine and Moldova.
“Water levels on the Danube near Izmail have reached 26 cm, making barge access impossible,” commented a market source. “Buyers have been attempting to load trucks from the Constanta terminal to get around this, but capacity is limited to no more than 50 trucks per day.”
Constanta, on Romania’s Black Sea coast, is one of the primary terminals for diesel imports in Eastern Europe. In July, the port received 401,000 metric tons of diesel and gasoil, according to Vortexa shipping data. Since the beginning of the year it has received over 2.35 million mt.
FOB premiums for diesel barges loading in Constanta have surged to $100-105/mt over the CIF Mediterranean benchmark, according to a source.
Like the situation on the Rhine, low water levels on the Danube are creating tremors through Central European middle distillate markets.
Austrian refiner OMV, which also owns the 86,000 b/d Petrobrazi refinery in Romania, told OPIS that, while production is not impacted by the drought, the company is seeing “temporary restrictions” in its distribution of oil products.
“(The restrictions) are mainly being mitigated through alternative transport options and adjustments in supply patterns. We are continuously monitoring the water levels across the region,” a spokesperson said.
The OMV CEO told analysts at an earnings call last week that “low water levels are an issue”. “All this is limiting supply chains, I think this is what is causing fuel prices and in particular, the middle distillate prices to be where they are”, he said.
Meanwhile, in Serbia the impact is being felt particularly acutely. According to local news, Serbian President Aleksandar Vucic warned that the 96,000 b/d Pancevo refinery may have to temporarily suspend operations.
“We are facing a great deal of trouble”, he told reporters. “We will do everything in our power, and I hope we won’t be forced to shut down the refinery. If we do have to stop operations, the Danube will likely become unnavigable within two or three days.”
“There is simply no oil, no diesel.” Vucic said.
–Reporting by Frederick Shaw, fshaw@opisnet.com; Editing by Jaime Llinares Taboada, jllinares@opisnet.com