London — Low barge freight rates for clean products barges in Northwest Europe and a contango in the distillates markets have spurred some demand for 10 ppm diesel and 50 ppm and 0.1% gasoil as the cost to take product to storage has reduced.
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The spread between the front-month and the second-month ICE low sulfur gasoil futures contracts was assessed at minus $1.25/mt Monday, a three-month low for the spread.
Empty storage in Northwest Europe meant traders were buying to fill tanks in the region now that the market structure was more favorable to storing distillates.
Lower barge freight rates due to increasing Rhine water levels allowing traders to load more products were also helping to support this demand.
The freight rate to take a clean products barge from Rotterdam to Basel in Switzerland was assessed at $23.50/mt Monday, the lowest level for the route in nine months.
The impact of the lower freight rate was felt more keenly further up the Rhine as traders there look to take advantage of the low freight, reducing the cost to get product to storage locations.
"The Swiss are very happy, they are importing to fill up their storage," a barge operator said.
End-user demand was still low, however, with traders awaiting an uptick in diesel demand in the coming month and mild temperatures currently reducing demand for heating fuels.
"There is better demand for barges but not on the end-users side, demand is to refill the storage at the end of winter," a Switzerland-based trader said. "It is very quiet on the end-users side, it is clear that heating season is over...Hopefully it is time for diesel demand to pick up a bit in April."
According to a Germany-based trader, it was a good time to buy 50 ppm gasoil and 10 ppm diesel due to the small contango in ICE low-sulfur gasoil futures and the lower barge freight, even if margins were not great on barges.
"We are not reluctant to buy anything...Demand is not strong, not very weak either but it looks like we are going to have sun and dry weather so freight rates won't get any lower as Rhine water levels are bound to fall," he said.
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