France Wants Traders to Return Millions of Barrels of Diesel

France Wants Traders to Return Millions of Barrels of Diesel
France is looking to replenish its stockpiles of diesel in coming months.

France is looking to replenish its stockpiles of diesel in coming months, another move by a European country to shore up supplies as winter approaches.

The French government wants companies to replenish fuel inventories that were released around June as part of a globally co-ordinated stock-draw. The idea is to refill during October and November, a person familiar with the matter said, without specifying a volume. A spokeswoman for France’s Ministry for Energy Transition confirmed the request.

France was a significant contributor to oil releases agreed back in March and April by member countries of the International Energy Agency. It pledged 7.88 million barrels of oil products -- all from public stockpiles -- of which the vast majority was diesel-type fuel.

The timing of the restock is important because the European Union is preparing to cut off almost all seaborne deliveries of diesel-type fuel -- as well as other refined petroleum products -- early next year from its single biggest external supplier: Russia.

It’s also a reminder that strategic fuel releases aren’t necessarily as bearish as the market can sometimes initially perceive -- since they must ultimately be returned.

For France, the EU’s upcoming sanctions are significant -- the nation is a major diesel importer and Russia was still its second biggest supplier of seaborne cargoes in August, having surrendered the top position to Saudi Arabia, according to data from Vortexa Ltd, compiled by Bloomberg.

Workers’ strikes at multiple French refineries, along with a recent fire at TotalEnergies SE’s Feyzin plant, are also curtailing France’s domestic fuel production, compounding the supply challenge. 

The company’s trading arm bought at least eight cargoes of ultra low-sulfur diesel and one of 0.1% sulfur gasoil since September 20 in oil trading windows, according to information from brokers compiled by Bloomberg.

The ministry spokeswoman said that the refill was normal, adding that the government anticipates -- and replenishes -- its stocks. 

According to an IEA breakdown from the earlier this year, France said it would contribute more than 6.1 million barrels of diesel-type fuel to the two collective releases that were agreed in March and April. That’s roughly enough to meet the country’s demand for a week. The IEA’s breakdown is incomplete, suggesting the actual figure for diesel-type fuel could be slightly higher.

Like France, the Netherlands is also stocking-up on diesel before the winter. It wants to go further than only replenishing what it earlier sold through the coordinated release by IEA member countries.

So far, the Dutch petroleum stockpiling agency, COVA, has issued tenders totaling as much as about 590,000 tons of diesel. Germany’s stockpiling agency has also recently issued a tender to import diesel, though the amount is far smaller.

--With assistance from Alan Katz and Prejula Prem.


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