LONDON: Diesel barge differentials in northwest Europe rose on Wednesday as imports from the United States were expected to drop in march, tightening supplies in the region.
Outright diesel barge prices dropped to their lowest level in two months after the underlying ICE gasoil futures fell amid easing concerns over the Crimean crisis.
The diesel arbitrage from the US Gulf Coast was closed for most refiners and traders due to US refinery maintenance, with import volumes expected to reach 700,000 tonnes this month, less than half the volumes seen in February, traders said.
"Diesel is strong in the US, tending to make people in northwest Europe focus on the prompt," a trader said. On the other hand, higher import volumes from Russia could offset the lower US supplies.
Diesel was trading at premiums of more than $10 a tonne above northwest Europe as a result of the lower US arbitrage and tensions in the Ukraine which sparked concerns of supply disruptions out of the Black Sea, traders said.
Demand for jet fuel in the region remained weak and prices were expected to decline in March due to large imports from Asia and the Middle East that are expected to reach nearly 2 million tonnes, according to traders.
"Imports are going to be around 400,000 tonnes higher than last year and will flood the market," one trader said.
The International Air Transport Association (IATA) reported on Wednesday an 8 percent growth in global passenger traffic demand in January compared to a year earlier.
European passenger demand rose 6.4 percent in January. The US weekly distillate stocks rose 1.4 million barrels to 229.0 million barrels, the Energy Information Administration reported, compared with forecasts of a 1.2 million barrel build.
GASOIL One barge of 0.1 percent gasoil traded in the Platts window at $1.50 a tonne fob ARA below March ICE gasoil futures, unchanged from Tuesday.
SK Energy sold to Morgan Stanley.
No barges of 50 ppm gasoil traded. There were no bids and offers were heard at $5 a tonne fob ARA above March gasoil futures.
March ICE gasoil futures dropped $7.25 to $912.25 a tonne at 1649 GMT.
The ICE gasoil crack <LGO-LCO1=R> declined to $13.90 a barrel from $14.05 a barrel.
The March and April ICE gasoil futures contracts were in a backwardation of $2 a tonne, up 50 cents from Tuesday.
DIESEL:
Ten barges of intermediate quality diesel traded, including 7 at $13.50-$14 a tonne fob ARA above March ICE gasoil futures, compared with premiums of $12 and $13.50 a tonne on Tuesday.
BP, SK Energy and Vitol sold to Morgan Stanley, Shell and BP.
JET FUEL:
Two jet fuel barges traded, including one at $55 a tonne fob ARA above March gasoil futures, down from $55 a tonne on Tuesday. BP sold to Shell. No cargoes traded. There was one bid and one offer, both by BP.
FUEL OIL:
Barges of LSFO with 1 percent sulphur content traded at $632-$641 a tonne fob ARA.
Barges of HSFO with 3.5 percent sulphur content traded at $573-$574 tonne fob ARA, down from $576.75-$578 tonne fob ARA on Tuesday.
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