German 50ppm gasoil premiums at two-year low

01 February 2013 15:37  [Source: ICIS news]

LONDON (ICIS)--German 50ppm gasoil premiums to front month ICE gasoil are at their lowest level since January 2011 because of poor demand resulting in an oversupply, a trader said on Friday.

Early in the afternoon, premiums stood at February ICE gasoil plus $2-3/tonne.

“There’s masses of product everywhere, and demand is very, very low,” the source said. “Last week, when premiums were at $4-5/tonne, I thought they couldn’t go lower – but they did.”

Exceptionally mild weather for much of this winter has seen reduced requirements for heating fuel.

Furthermore, German consumer stocks are thought to stand at 58-59%, meaning that unless there is a prolonged snap of very low temperatures, there is little need for further end-user purchasing.

“Two to three weeks of cold weather might be possible in February,” the trader said. “But it’s not looking good [for the market].”

Further hampering trading activity is an ICE gasoil backwardation that has persisted for most of the winter.

Recent weeks have seen this backwardation steepen to a level that serves as a firm deterrent to buying for storage.

At 15.00 GMT, February ICE gasoil was at $1,000/tonne, while March ICE gasoil stood at $989.50/tonne.

“The ICE backwardation is the key factor,” the trader said.

The source added that if the ICE backwardation were to flatten out, interest in the product may increase.

“The euro-dollar exchange rate is also a problem,” the trader added.

($1 = €0.74)


By: Jo Pitches
+44 208 652 3214



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