01 June 2012 12:46 [Source: ICIS news]
LONDON (ICIS)—The eurozone debt crisis has led to a significant slowdown in demand across Europe’s product markets but the situation will not be as severe as during the 2008 recession, participants said late this week.
“The market is slowing, it feels like there’s no light at the end of the tunnel,” a naphtha trader said on Thursday. “However, it feels like there’s a softer landing this time. It’s not as bad as 2008, when everyone had lots of expensive stock.”
“I join this view,” a second naphtha trader said on Friday. “It will be much softer this time, as people are running with low stocks.”
“People are nervous,” a gasoil/ULSD trader said on Friday. “But we’re not going to see those numbers [prices] from 2008. It’s a completely different situation this time. People were less prepared then, when the price crash happened. But [this time] Europe has been buying on a hand to mouth basis. The stock build is only in the US, and only for crude, not products.”
The consensus is that this cautious, low-stock level approach is applicable across all the European product markets.
For many months, anxiety stemming from the eurozone crisis, reinforced by a backwardated price structure in the mid-distillate markets, has resulted in buying occurring only on a hand to mouth basis. Following the run-down of stocks as 2011 drew to a close, there was no traditional re-stocking at the beginning of 2012.
While the much lower crude oil prices seen recently have resulted in product values dropping significantly, buyers are still extremely cautious due to the uncertainty of the situation.
However, the gasoil/ULSD trader is of the opinion that price falls may halt for the time being.
“We’ve seen prices fall by 20% in a month. But they can’t keep on dropping 20% every month. They have to stop somewhere. I think much will now depend on the [outcome of the] election in Greece,” he said on Friday.
When asked whether lessons have been learned from the 2008 crisis, the second naphtha trader replied on Friday: “Lessons are never learned. But this time the collapse is smoother.”
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