Arterial supply keeps crude flowing in, but low Rhine water is choking the return flow — forcing Europe’s inland refining system to rethink Heavy Sweet, resid and where those barrels ultimately go.
Arterial supply — crude pipelines — keeps pumping blood in, but venous return — Rhine barge transport — is completely clotted by low water, causing rapid and painful swelling as tankage fills towards ullage in the heartland of European industry.
All those inland refineries fed by pipelines invariably become allergic to Heavy Sweet now.
You just wouldn’t maintain it on your slate in good conscience, forcing yourself to be left with 40–60% resid yield even if what is being returned is sub-0.5%.
Angolan, Kribi and Meleck should all go into the Med now.
Kraken discounts Brent further for Chevron into the US Gulf Coast.
Total must be very pleased they kept Donges alive, as that maintains a NWE derivative footprint without the Rhine baggage.
That MOEVE/GALP JV cannot come together fast enough.
They have the greatest advantage on freight for West African Heavy Sweets.
What Mercuria did with ENI is increasingly looking like a stroke of genius.
Integrating ENI’s massive upstream/downstream asset footprint — Milazzo, Taranto and Livorno — with their own trading and risk management desk.
Mercuria achieved the exact same outcome as Vitol and Trafigura:
All without taking heavy physical refinery ownership onto its balance sheet.
ENI is also the partner of choice for Sonatrach — not Total, as logic might suggest.
That allows Mercuria to hug even more of those crucial Med data points:
All that being said, it may seem like an insurmountable task for everyone else to compete in this arena.
Local Med fuel oil paper is too thin to hedge this influx.
0.5% traders aren’t exactly going to start involving themselves in Heavy Sweet either.
But it may be as simple as bean counting the Heavy Sweet.
You just need to bet on the forest; you don’t need to pick the tree.
As for HSFO, 3.5% barges NWE, this is leaning directly into all things Central and South American — metals-heavy fuel oil, which is fraught with its own set of issues.
Repsol Spain is the short if these cargoes fail to absorb off North West Europe.
SOMO SRFO exiting from Syria is struggling to make it further west than Spain, but that is again Repsol picking up that slack as a feedstock, not MOEVE.
Likely a function of it not having a paper presence and therefore disappearing off our balance sheet as a practical utility.
As it does if it goes into Red Sea furnaces with Aramco.
