21 Apr 2020

Z Energy selling fuel back to world market

3:28 pm on 21 April 2020

The country's biggest fuel retailer has been selling unwanted fuel back on the world market at a loss, to counter the slump in demand and take the pressure off storage.

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Photo: RNZ

Oil prices fell overnight on the news that there was no spare storage.

Z Energy chief executive Mike Bennetts said it had been working to avoid a similar problem.

"We've done a lot of things over the last three to four weeks to make sure that we've got storage available for what we are manufacturing at Refining New Zealand.

"Some of the imports we had coming into the country - to keep it simple - we turned those boats around and sent them back to where they came from, and sold that product back into the market so that we wouldn't have the constraint here in New Zealand.

"We've got to be very careful how we manage the supply chain, if we get it wrong and we don't have enough fuel that obviously affects our customers and if we get it wrong (at the other end of the scale), we have too much fuel that will affect us by way of having to sell."

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Bennetts said Z Energy worked closely with Refining New Zealand to manage the amount of stock on the domestic market.

Waitomo managing director Jimmy Ormsby said while the company did not have the storage pressures related to imports, it had worked to manage its in-house capacity.

"We have got capacity to take more product because we've been running [our tanks] low ... so if we were approached we could take more but obviously we'd want to make that commercially attractive."

Bennetts said fuel demand would increase with the country's move to level three next week.

"We expect more people coming into the service stations for their commute to work, also with industry going back like forestry and construction ... we'd expect to get more upside from them coming back to work.

"Overall, we're currently down about 80 percent on our volumes and we think that could probably rise to only be down about 60-odd percent. So still quite a lot down, but it's obviously a significant improvement on where we are right now."

He said it was hard to say what impact the glut would have on petrol prices.

"My crystal ball on pricing is no better than anybody else's. It's very volatile with both the exchange rate and the underlying cost of crude.

"We'll just have to see how that plays out over the next couple of months as New Zealand comes out of lockdown or the different alert levels and we get some demand growth coming back and what that means on international markets is frankly too hard to call."

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