Europe gasoil demand up, supply tight on refinery maintenance

31 October 2013 16:32  [Source: ICIS news]

LONDON (ICIS)--European demand for gasoil is steadily increasing on the back of a strong euro and the start of colder weather, but supply is tight on refinery maintenance, industry sources said on Thursday.

Gasoil barges are trading at a premium over November ICE gasoil futures as a result.

In Germany, gasoil demand has picked up. "If you have a low flat price [ICE gasoil futures] and a strong euro, that will motivate people to buy," a gasoil trader in Germany said.

Gasoil demand is healthy for this time of the year despite high consumer stock levels in Germany, the trader added.

Gasoil is primarily used as a fuel for heating purposes, with demand traditionally increasing in the approach to winter.

Meanwhile, gasoil supply is tightening on the back of the ongoing refinery maintenance in Europe.

A second gasoil trader said: "It's a bit limited, [that is] sources of supply on the gasoil side for 0.1 [gasoil grade]. It could be because of the refinery maintenance. Russia is a supplier of 0.1 and they have also been in part maintenance. 0.1 is getting harder and harder to find."

Nevertheless, traders are shying away from buying high-volume purchases as the backwardation in the ICE gasoil futures market has deepened.

December ICE gasoil futures settlements were up to $8.50/tonne lower than November settlements at 16.15 GMT.

A backwardation – where future prices are traded lower than the current month’s price – discourages buyers from purchasing product with the aim of selling at a profit in the future.

Independent stock data on Thursday revealed that gasoil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region were down from last week.

($1 = €0.73)

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By: Cuckoo James
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