EMEA middle distillates: Key market indicators this week

London — European distillates markets have fallen slightly although remained relatively supported amid lockdown measures, as low supply continues to somewhat balance low demand.

Derivatives

• Speculative net long positions in ICE low sulfur gasoil futures fell 3,257 contracts in the week to Jan. 12 at 70,259, down from the one-year high reached Jan. 5, according to ICE data.
• Traders in the managed money category increased both long and short positions, with long positions reaching a fresh one-year high of 25,678 but new short positions outweighing this rise.
• Open interest in ICE LSGO futures hit a 15-month high on Jan. 5, rising 30,761 contracts in the reporting week to 965,952 contracts.
• European jet fuel swaps remain supported by supply-side fundamentals, which have balanced a lack of demand with reduced production and lower imports, keeping prompt swaps at near 10-month highs despite increasing lockdown measures reducing aviation demand.

Diesel

• Supply length put cash differentials across Europe under pressure in the week to Jan. 17 while demand remained weakened by lockdowns and travel restrictions.
• In Northwest Europe, some exports to the US Atlantic Coast helped to tighten supply and support cash differentials, although there is some disagreement over the openness of the arbitrage among market participants.
• The US Gulf Coast to Europe arbitrage remained closed in the week, supporting supply-side fundamentals in both Northwest Europe and the Mediterranean, with length heard to be building in the Mediterranean.
• In the barge market, FOB ARA barge premiums fell $2/mt on the week from flat to a $2/mt discount to front-month ICE LSGO futures Jan. 15 on lackluster demand, with some volumes remaining in inland stocks and consumer demand weak.
• Diesel and gasoil inventories in the Amsterdam-Rotterdam-Antwerp trading hub decreased 4.4% on the week to 2.513 million mt in the week to Jan. 13, Insights Global data released Jan. 14 showed. ARA diesel and gasoil stocks are now 2.5% lower than the same period a year ago.

Jet fuel

• Jet CIF NWE cargoes fell $4.25/mt on the week to $474.25/mt on Jan. 18 to be at a $22.25/mt premium to front-month ICE low-sulfur gasoil futures, down from a $24/mt premium on Jan. 11, S&P Global Platts data showed.
• Jet/kerosene inventories in the ARA trading hub were 1.48% lower on the week at 938,000 mt on Jan. 14, but are still 53.62% higher than a year earlier, according to Insights Global data.
• Four months of lower-than-average jet fuel cargo arrivals into Northwest Europe continue to support the jet market as market sources have reported that floating storage has greatly diminished as the region has called on it to fill supply.
• Arrivals of jet fuel into NWE for November 2020 were down on October at 745,000 mt, according to Kpler. December 2020 and January 2021 experienced a slight uptick although remained low at 1,054,000 mt and 1,188,000 mt, respectively.

Gasoil

• Premiums for 50 ppm barges in NWE fell in the week ended Jan. 16 since the introduction of a higher tax rate on 50 ppm gasoil purchases in Germany. Demand had dropped as buyers filled up their tanks as much as possible before the hike and now had no space for purchases, sources said.
• This lower demand also led to more supply from German refiners being offered to buyers in Switzerland, local sources said.
• Heating oil consumption was increasing in Europe due to sustained low temperatures, but the high levels of inland stocks across the continent meant this was yet to translate to higher demand, sources said.
• There continued to be a premium for higher flash and density gasoil grades in Europe in the week ended Jan. 16 as refinery run cuts and the blending of jet fuel had reduced these values of the pool.