Markets

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

Published August 15, 2011 Updated August 15, 2011 04:51pm

3 min

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By Abdul Ahad

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"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.

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