Europe VGO hits 7-month high on poor Russia supply, high US demand

07 February 2014 16:03 Source:ICIS News

LONDON (ICIS)--European vacuum gasoil (VGO) differentials against ICE Brent crude oil futures have hit a seven-month high on the back of poor Russian supply coupled with healthy US demand, industry sources said on Friday.

Premiums in the low-sulphur (LS) northwest European VGO markets rose to $10.50/bbl on Friday, up from $10.00/bbl on Friday 31 January.

A VGO trader said: "[There is ] complete absence of serious sellers. Reduced supplies from Russia because of the cold. At the same time US demand is still strong."

LS VGO is usually exported to the US, and any increase in demand exerts upward pressure on VGO differentials.

Meanwhile, high-sulphur VGO differentials rose from a premium of $8.00/bbl on Friday 31 January to $9.00/bbl on Friday.

VGO is used to make distillates and is the primary feedstock for European base oils.

By Cuckoo James