LONDON: European diesel margins edged lower on Friday as limp demand and full tanks offset an expected decline in cargo arrivals from the United States during July.
While European economic turmoil could knock demand on the continent, traders said it would not significantly impact global balances, particularly with a diesel supply excess.
Buying in northwest Europe was subdued, particularly in Germany, where high stocks weighed on buying interest.
Traders said it could pick up once the agriculture season comes into swing later in July.
Inland refineries in Germany and Switzerland were offering barges of diesel and 50 ppm heating oil at large discounts to ARA prices, shutting out imports to the region.
German heating oil stocks were six percentage points above the five-year average at the start of June, according to a trade source.
But spiking costs for biofuel compliance credits in the United States, along with unseasonably strong diesel demand widened the spread between US distillate futures and ICE gasoil futures to its largest since March 2015.
As a result, traders said the spot arbitrage was closed, with just 800,000 tonnes expected to land in Europe in July, down from 1.3 million tonnes in June.
Russia's exports of ultra-low sulphur diesel (ULSD) from the Baltic Sea port of Primorsk were also set to fall in July to 1.028 million tonnes from 1.168 million tonnes in June.
Still, Russia may increase diesel exports via Latvia's port of Ventspils in July by a quarter from the previous month to 250,000 tonnes, traders said on Friday.
GASOIL
No barges of 0.1 percent sulphur gasoil traded.
No cargoes traded.
Belgomine sold to Mabanaft one barge of 50 ppm gasoil at a $9 a tonne fob ARA discount to July diesel futures.
The July Low Sulphur Gasoil futures were $5.75 lower at $436.75 a tonne at 1600 GMT.
The July contract traded in a contango of $4.50 a tonne to the August contract, 50 cents wider than a day earlier.
The diesel refining margin was at $9.98 a barrel, down from $10.11 a barrel.
DIESEL
Fourteen diesel barges traded at discounts of $3-$4.50 a tonne fob ARA to July diesel futures, compared with Thursday's trades at discounts of $4.50-$5 a tonne.
Litasco, Vitol, Belgomine, Licorne, Glencore and Phillips66 sold to BP, CCI, Total and Vitol.
No cargoes traded.
JET FUEL
No barges traded. Shell and BP each bid for two barges, including at $17 and $18 a tonne fob FARAG premiums to July diesel futures. Litasco and KLM offered barges at premiums of $19-23 a tonne fob FARAG.
No cargoes traded.
FUEL OIL
Barges with a sulphur content of 3.5 percent fuel oil traded at $236-$238 a tonne fob ARA, down from $241-$242 a tonne fob ARA on Thursday.
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