EMEA Middle Distillates: Key market indicators this week
21st September 2020 19:05 GMT

European diesel markets looked weaker as traders saw demand falling back as coronavirus cases in Europe rose, while gasoil and jet fuel markets strengthened.

Derivatives

** Speculative net long positions in ICE low sulfur gasoil futures fell 16,439 contracts to 4,675 in the week to Sept. 15, a six-month low, according to Intercontinental Exchange data. Managed money long positions fell by 1,449 contracts to 79,307 contracts, while short positions increased by 14,990 contracts to 74,632, the largest number of short positions in the category since January 2016.

**The front-month Exchange of Futures for Swaps widened to a four-month high of $5.68/mt on Sept. 21, with Asia contributing to much of the strength amid an uptick in trade activity as participants eyed flows of gasoil onto ships for floating storage with options for discharge in the West.

** The front-month CIF NWE jet fuel cargo swap was assessed at a three-month high of minus $10.25/mt Sept. 21, as paper markets followed strength in other regions while also tracking crude prices up to keep cracks from falling further.

Diesel

**CIF NWE ULSD cargoes were assessed at $337/mt on Sept. 18, down $1/mt on the day, and assessed at a $2.50/mt discount to front-month ICE low sulfur gasoil futures, down from a $1.75/mt discount Sept. 17. Meanwhile, CIF Med ULSD cargoes were assessed at a $3.25/mt premium over the front-month ICE LSGO contract, down from a $3.75/mt premium the previous day.

**In the Amsterdam-Rotterdam-Antwerp trading hub, diesel and gasoil inventories rose 1.6% week on week to a 13-month high of 2.948 million mt as of Sept. 16, Insights Global data released Sept. 17 showed. This represents the highest stock level since July 31, 2019, the data shows. ARA diesel and gasoil stocks are now 7.4% higher than at the same time last year.

**Diesel floating storage increased markedly in the North Sea and ARA to around 800,000 mt in the week beginning Sept. 14 from around 600,000 mt in the week starting Sept. 7, latest Kpler data shows.

**Diesel consumption recovery has stalled in Europe, reported down 5% to 10% year on year in September. In France, Europe’s biggest importer of ultra low sulfur diesel, demand for the road fuel dropped 4.5% year on year in August, the latest official data showed.

**Many Mediterranean refineries have cut runs again and are now running at minimal rates, leading some refiners to buy diesel in the spot market, but this was not happening yet in Northwest Europe.

Jet fuel

**The jet CIF NWE cargo discount moved to $11.25/mt on Sept. 18 -- a three-month high -- from $19.50/mt on Sept. 11. One trader put the rise in European jet fuel swaps markets down to an increase in other regions and on following crude prices up to keep cracks from falling further. Other traders talked of storage demand in recent weeks due to a front-month contango in jet cargo swaps amid still poor aviation demand.

**Jet and kerosene inventories at the Amsterdam-Rotterdam-Antwerp trading hub fell 4.22% week on week to 954,000 mt as of Sept. 17, according to Insights Global data released Sept. 16. Stocks were 42.18% higher than a year ago, according to the data.

**Global scheduled flight capacity in the week starting Sept. 14 was at 46% of the level last year, trending down over the past six weeks, according to aviation data company OAG. In Europe, regional capacity accounted for 85% of available seats, highlighting the lack of long-haul flights as fears of a second wave of coronavirus in Europe have risen in recent weeks.

Gasoil

**0.1%S supply in the Med was low last week low due to the configurations of the refineries in the region optimizing for ULSD over gasoil, source said. Traders will look to refineries to lower run rates this week, due to the surplus of ULSD, which could tighten the market further, but other sources questioned how much more rates could be reduced before shutting down the refineries.

**The FOB ARA 0.1%S gasoil crack fell $1.12/b to 22 cents/b on Sept. 16, S&P Global Platts data showed, the lowest in data going back to November 2007.

**Gasoil demand in Europe is expected to remain low this week due to high inland stock levels, with the only demand support coming from blending into higher sulfur fuels such as 0.5%S marine fuel, and exports to North Africa. There are still no expectations for improved heating oil demand until winter, sources said.

**Rhine levels are expected to stabilize around the low level of 78 cm this week, down from 91 cm on Sept. 21, according to the German Waterways Authority. This comes after sources said last week that oil product barges were being forced to load at 50% capacity, causing freight rates to rise from their low levels.


Bunkerworld .,
21st September 2020 19:05 GMT

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