16 July 2013 16:40 [Source: ICIS news]
LONDON (ICIS)--Northwest European diesel supply is being boosted by US and Russian imports, and this is exerting downward pressure on diesel price premiums, industry sources said on Tuesday.
Around 800,000 tonnes of diesel were exported from the the major Russian Primorsk terminal in June, and it is expected these monthly volumes will continue to be imported into northwest Europe for the next few months, sources said.
“There is plenty of [product] around. The arbitrage is now open from the States. There is ample supply from Russia,” a diesel trader said.
However, a second trader said offers are still not very frequent in the diesel market: “ARA [Amsterdam-Rotterdam-Antwerp] market is still looking tight, despite the weak demand. In case somebody has an inquiry for 10-20 KT [10,000-20,000 tonnes] cargo it is not easy to find an offer.”
The healthy volumes from Russia and the US are likely to be too widely dispersed to have much impact on the northwest European market, it said.
The second trader said: “Always have to see where [stocks] will land. Think part will land in UK, part in northern Germany, part in Le Havre [in France] area and part will land in the Mediterranean.”
The imports have impacted market setiment in the region, with diesel bids dropping to $19-21/tonne over August ICE gasoil futures on Monday from $18-25/tonne early last week.
Overall gasoil demand has died down in Europe due to less heating requirements, and diesel – a grade of gasoil – demand is being eroded by the lack of a proper contango in the ICE gasoil futures market.
"All gasoil is diesel now anyway," the first trader said on how the generic term gasoil now mostly refers to the diesel grade.
Buyers tend to buy stock for storage when the futures market is in steep contango, when prompt prices are lower than those for products delivered at a future date.
The lack of a contango has resulted in buyers refraining from building stocks ahead of the autumn maintenance season, the traders said.
“With current spreads and with current structure on the swaps I don't see too many people building up stocks already in ARA region. It is too soon for it,” the second trader said.
On Monday at 15:30 GMT, August ICE gasoil futures traded at a slight contango of $0.50/tonne over the market for September.
“Perhaps busy with creating length at discharge ports in US or the East, but not keeping material already in tank now for the demand that could come in October or so,” the second trader said on demand.
Last week, demand from the Mediterranean has helped support diesel premiums in northwest Europe and offset downward pressure from poor domestic trade and rising supply from Russia and the US.
($1 = €0.77)
Follow Cuckoo James on Twitter
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
Asian Chemical Connections