Europe gasoil markets hit by jitters after sanctions on Rosneft chief

30 April 2014 16:14 Source:ICIS News

LONDON (ICIS)--European gasoil markets have been hit by jitters after the US Treasury extended sanctions on high-profile Russians to include Rosneft's chief Igor Sechin, industry sources said on Wednesday.

Russia's state-controlled energy company Rosneft is headquartered in Moscow's Balchug district near the Kremlin.

"Right now we see less Russian gasoil coming this direction. Everybody is a little bit cautious about trading with Russia," a gasoil and diesel trader said.

A second trader said: "Most of the gasoil from Russia gets converted into diesel."

Europe is short on diesel and is reliant on US and Russian supplies to meet its transport fuel requirements.

The uncertainty has created an artificial backwardation in the market at a time of the year when the market is normally in a contango, sources said.

A backwardation is when current prices are higher than future prices and is characteristic of markets where prompt supply is tighter.

The first gasoil trader said: "The May/June, June/July and Jul/Aug [ICE gasoil futures] spreads are basically stronger."

The second trader remarked that gasoil demand is seasonally poor, but diesel demand is expected to rise in May as more people take to the roads as the weather improves.

By Cuckoo James