Distillates Gasoil firms tight in Europe market

LONDON: Gasoil barge prices in northwest Europe firmed on Tuesday, trading at parity to the September futures rather than the usual discount as the market remained tight, despite a backwardation that should have encouraged product to come out of storage.

"It seems there is not so much (product) around," said one middle distillates broker.

Traders said there was not as much product coming out of storage as might be expected given the backwardation in the front months of about $3 a tonne.

The bigger players in particular seem reluctant to push out product before the European heating oil restocking season has really gotten underway.

Baltic gasoil has been bypassing the Amsterdam-Rotterdam-Antwerp hub for South American and West African destinations.

Traders said smaller players were able to offer just as competitive fixings, which was encouraging the larger players to stay on the sidelines.

"The markets are still tight and traders want to maintain their long positions," said one broker. "They will probably be more willing to sell jet as we ease out of the flying season prices there are expected to ease."

A jet fuel broker said he had seen some selling out of storage in the last week or so but that seemed to be finished for the time being.

"The problem with all these distillates (is) that supply-demand seems so finely balanced that unforeseen problems can have a disproportionate effect on price," said one broker.

There were four deals in the window, with some 7,200 tonnes trading at parity with September ICE gasoil futures, compared with discounts of $1-$2 a tonne fob ARA on Monday.

Hetco and Shell were sellers, while Morgan Stanley, Fina and Vitol were buyers.

The September ICE gasoil contract was up 0.41 percent to $926.50 a tonne by 1540 GMT.

The ICE gasoil crack was at around $14.71 a barrel, little changed from Monday.

The backwardation for September-October was unchanged at $3.00 a tonne, with October-November also at $3.

Diesel activity picked up with eight barges trading at premiums of $24-$24.50 a tonne fob ARA to September ICE gasoil futures, in line with Monday's premium of $24 a tonne.

Shell was joined on the sell side by Totsa, with Morgan Stanley, North Sea Group and BP making up the buyers.

Two barges traded, with BP selling 2,000 tonnes to Totsa at a premium of $74 a tonne fob ARA over September ICE gasoil futures, up from Monday's trades at $70-$73 a tonne over ICE gasoil.

BP also sold 2,000 tonnes to Vitol with the first 1,900 tonnes going for a flat price of $999 and the balance at $2.50 over the free on board barges high price.

One cargo traded, with BP booking jet fuel offered by Totsa at a premium to September ICE gasoil futures of $81.50 a tonne cif.

Barges of low sulphur fuel oil (LSFO), with 1 percent sulphur content, traded at $648 a tonne fob ARA, up from $642 a tonne fob ARA on Monday.

Barges of high sulphur fuel oil (HSFO), with 3.5 percent sulphur content, traded at $621-$621.50 a tonne fob ARA, up from Monday's $613.75-$615.50 a tonne.

Copyright Reuters, 2011