Products

A contango emerged in the European ICE gasoil market at the end of the first quarter of 2013.

This price structure encouraged the buying of mid-distillates for sale at a later date.

An extended winter has sustained requirements for heating oil, particularly impacting the German 50ppm gasoil market.

This, combined with the contango in the ICE gasoil futures market, has fuelled buying appetite for distillates.

Demand for ultra-low sulphur diesel (ULSD) – usually representing one of the stronger product markets – has traditionally risen in summer due to seasonal agricultural and transport demand. In the long term, demand for this fuel is expected to rise in northwest Europe.

However, the backdrop of Europe’s economic woes is perpetuating a cautious mood among market players in the refined products market.

Since mid- March, the naphtha market has suffered, with the structural oversupply and slow demand adding to the uncertainty caused by pricing volatility in the upstream ICE Brent crude oil futures market.

The spring cracker maintenance season has dampened demand in the European naphtha market, while demand for naphtha as a gasoline blendstock from the US was lower than expected for the season.

The only relief has come from the open outbound arbitrage to Asia, which has absorbed some of the excess naphtha supply in Europe.

Updated to mid-May 2013