Europe's colder weather fails to ignite heating fuel demand

Europe's heating oil market remains weak despite colder temperatures as flat prices have impacted demand amid high stocks.

Temperatures in Northwest Europedipped in the week to March 11, according to S&P Global Commodity Insights data. In Rotterdam, temperature lows ranged from 2 Celsius on March 1 to minus 3 C March 11 and are forecast to fall 2 C below the normal seasonal average by March 15 after rising slightly over the weekend.

In London, temperatures are expected to follow a similar pattern, S&P Global data showed.

Despite the colder weather, demand for diesel and gasoil remained weak as stocks in the Amsterdam-Rotterdam-Antwerp shipping hub were 52.47% higher than the same period last year. Stocks stood at 2.493 million mt on March 9, according to Insights Global.

Distributors in the Belgian and Swiss markets also reported length in the market, as many stocked up expecting tightness following the Feb. 5 EU sanctions on Russian oil products.

Now, with demand yet to materialize, the distributors are struggling to place these volumes.

Traders also suggested that high flat prices curbed demand as end-users cut back to save money.

Platts, part of S&P Global, assessed the 50 ppm gasoil FOB ARA barge price at $816.25/mt on March 10 in flat price terms, coming off $35/mt on the week. A year ago, March 10, 2022, the 50 ppm FOB ARA barge was assessed at $1,041.75/mt in flat price terms.

"Although flat prices have come off, inflation remains high," one trader said.

Wilting propane sentiment

The propane market has also been on a downward trend since early March, as strong selling interest pulled the cargo and coaster market in Northwest Europe lower.

Platts assessed the propane CIF NWE large cargo market at $582.75/mt on March 10, down $106/mt from the previous week, while the FOB NWE seagoing coaster market was down $65/mt on the week at $645/mt March 10.

Despite lowering prices and colder weather across Europe, sources pointed to stalled demand from both the heating sector and the petrochemical industry.

With the end of winter fast approaching and cracker margins still being poor, there has been little support for the propane cargo and coaster markets, traders said.

"Demand fell by 300,000 b/d from the previous week, owing to a combination of lower exports and domestic demand. The 200,000 b/d export decline doubled the domestic demand fall," analysts at S&P Global said.

The analysts added that exports were the lowest in the past four weeks, but the trailing four-week average remained robust at 1.6MMb/d. The temporary slowdown as projected contributed to an inventory build on the US Gulf Coast.

US production was mostly stable, but it inched to the highest level in the past 11 weeks, according to the Energy Information Administration data compiled by S&P Global. The production range so far this year is narrow at about 85,000 b/d after the EIA monthly calibration to narrow the gap between weekly and monthly output data, the data showed.

Platts assessed the front-month CIF NWE propane swap discount to the equivalent naphtha swap at $148.50/mt March 10, slightly widening from the $135.75/mt discount seen in the previous week. The front-month propane swap has hovered around the $100/mt discount line since the beginning of February.

"All price signals are weaker in early March, mainly in response to the very small propane weekly inventory decline for the week ended March 3," analystsat S&P Global said. "The latest stock decline was the smallest since early 2022 when the inventory rose unexpectedly."