Softer crude prices having no impact on Europe distillate demand

13 April 2012 15:49  [Source: ICIS news]

LONDON (ICIS)--Lower prices for Brent crude oil in recent days have so far done little to improve the lacklustre demand for European distillates, market participants said on Friday.

“There’s no improvement in demand, even though crude prices are lower,” a trader in the German 50ppm gasoil and ultra low sulphur diesel (ULSD) markets said, adding: “Buyers are holding back, prices [of distillates] are still too high.”

“Lower crude [prices] have had no impact,” a 0.1% sulphur gasoil cargo/ ULSD cargo trader said. “[Distillate] Prices are still too high. Even buyers from other regions think they’re too high, and are holding back.”

A trader in the 0.1% sulphur gasoil barge and ULSD barge markets said: “Crude is lower, but it’s no help. People don’t need it [gasoil], and prices are too high.”

Demand for distillates has been subdued for many weeks, with elevated prices seen as the main reason. Purchasing has been taking place on a hand-to-mouth basis compared with the restocking normally seen early in the year.

This ongoing lack of demand is especially significant for the diesel markets, as the onset of the agricultural season normally signals an increase in demand.

When asked how much lower flat prices would need to be in order to rejuvenate buying, the 50ppm/ULSD trader said: “It’s difficult to say how much of a drop would be needed, but maybe $100-200/tonne [€76-152/tonne].”

At 15:10 BST, May Brent crude oil was trading at $121.30/bbl. At 16:30 BST on 3 April, it was trading at $125.50/bbl.

($1 = €0.76)

By: Jo Pitches
+44 208 652 3214

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