Europe Distillates-Premiums fall in thin trade, slack demand

LONDON: Backwardation at the front of the curve persisted in diesel and gasoil markets, deterring traders and end-users from holding stocks in storage and helping to eat into prices in northwest Europe on Monday.

"With the current backwardation there is no reason why people should hold stock, especially given the number of ships on the horizon," said a diesel trader, adding bids for US cargoes were thinly spread.

End-user demand has thinned after snapping up volumes two weeks previously, when a steep drop in crude prices rattled the market, bringing outright prices lower.

"The flat price of oil is off the lows. Maybe that has killed some buyers," said a distillates trader.

Summer holidays have also contributed to the increased volumes available for export from the US and to slack demand in the region.

"August -- no one is around and a few think that if the screen stays backwardated then premiums have to suffer," the second trader continued.

GASOIL

* Activity remained thin with two barges changing hands in the window at discounts to September ICE gasoil futures of $1-$2 a tonne fob ARA, down from parity on Friday.

* North Sea Group sold to Mabanaft, Hetco sold to Petrofina.ConocoPhilips bid for a cargo in the window, but there were no offers.

* The September ICE gasoil contract traded up 0.76 percent to $924 a tonne by 1600 GMT.

* ICE gasoil cracks hovered at around $15 a barrel through most of the session, little changed from the previous week.

* Margins were slipping lower towards the end of the day however, as prices lagged further behind crude.

* The front month ICE gasoil September/October backwardation was at $3.00 a tonne, after settling at $5 the previous session.

DIESEL

* Diesel activity thinned with just two barges trading at $24 a tonne fob ARA over ICE gasoil futures, down from $26.00-$27.50 a tonne fob ARA on Friday.

* Shell continued to be the only seller, with Morgan Stanley buying both barges. Gunvor offered a cargo during the window but there were no bids.

* Turkey agreed to send another 14,000 tonnes of diesel to rebels in Libya, effectively joining Qatar and trader Vitol in fuelling the uprising against leader Muammar Qadhafi.

JET FUEL

* Four barges traded at premiums of $70-$73 a tonne over ICE gasoil futures, little changed from Friday's $71-$72 a tonne.

* Statoil, Litasco and BP were sellers, with Morgan Stanley buying three and North Sea Group taking the fourth barge.

* No cargoes traded, but there were several bids, the highest at $83 a tonne, while just one offer was made at a premium of $80 a tonne.

Copyright Reuters, 2011