ICE gasoil futures backwardated for the first time since May 27 on firm exports
An increase in demand for gasoil from the US East Coast, West Africa and South America, as well as a closed arbitrage for diesel from the US into Europe have resulted in less product being stored in the Amsterdam-Rotterdam-Antwerp region, with some product even being drawn from storage, shifting the ICE gasoil futures curve into backwardation between the November and December contracts.
The front-month 0.1% ICE gasoil futures structure closed in backwardation at 16:30 London time Friday for the first time since May 27, with the November contract at $741.50/mt, $0.75/mt above the December contract. "The US is pulling barrels from Europe, [the backwardation] it's a combination of less diesel coming in and more gasoil going out," said one trader.
"Basically I think we're at export levels on the gasoil. There will also be some local demand in the winter -- so either it's going to go for export or consumption but it's going to be sold," said another trader.
Several traders expect sharper increases in storage draws following a drop in resupplies from the Baltics, adding that the backwardation could hold for at least a month, until all refineries in the region are back online.
Despite stocks having been drawn in the last few weeks, according to a stocks report from BNP Paribas released Friday, distillate stocks, comprising both gasoil and diesel, were mostly unchanged week on week, and remain 35% above last year's levels and 22.1% above the five-year average.
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- November 3, 2014
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