Switzerland to release oil stocks as Rhine levels hit record low

Quantum Commodity Intelligence - The Swiss government will release oil stocks from its reserves as its usual imports on the Rhine River have dried up amid record low water levels, while train cargo has suffered from recent industrial action, it said Friday.

The government will release 245,000 cubic metres (1.54 million barrels) of oil from July 25 until the beginning of September, or 6.5% of its stock levels and equivalent to 25% of monthly demand.

"Logistic bottlenecks on the Rhine and on foreign railways are affecting the replenishment of mineral oil products," the Swiss government said.

The reasons were two-fold for the shortage in the domestic market, the statement added.

"First, the prolonged drought, which led to record-low Rhine levels, so that the loading quantities had to be drastically reduced. Secondly, cross-border rail traffic is affected by failures and massive delays due to staff shortages and construction work."

It is the first time the Swiss released stocks from their reserves since the dry summer of 2018, which slowed Rhine flows and briefly caused the German economy to contract.

The Rhine is by far the cheapest way to transport commodities such as oil products, biodiesel, petrochemicals, coal and agricultural bulk between the Netherlands, Germany, France and Switzerland.

Severe dry weather has caused Europe's busiest waterway to dry up, with levels along chokepoint Kaub, near Cologne, reaching 73 cm by Thursday, compared to more usual levels of 180 cm for this time of year.

That has limited volumes barges can carry on the Upper Rhine to 800 mt, down from 2,500 mt, while low water levels at Maxau, near Stuttgart in southwest German, will limit flows into Switzerland.

"The Rhine continues to fall after a short wave. The forecast for the upper Rhine shows a slower decrease compared to the last days. Nevertheless, some barges will no longer sail beyond Maxau next week," brokerage Riverlake said.

The dry water levels have caused freight rates for barges to hit a record high.