London — The FOB ARA 0.1% barge discount to the front month ICE low sulfur gasoil futures rose to minus $4.75/mt Wednesday, the smallest discount since October 2012 following persisting export demand combined with a tighter supply picture, according to Platts data and sources.
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"Not many refineries in the Amsterdam-Rotterdam-Antwerp region still produce it [0.1% gasoil], while ARA is an export hub for Algeria and Argentina. You add the two up and you can understand why the differential between 0.1% and 10 ppm is so narrow," said a second source.
Last week, the spread between both products reached $4.50/mt, only $0.50/mt shy of the narrowest spread ever recorded.
Diesel barges have been trading sideways for the past few weeks with a well supplied diesel pool.
But FOB ARA diesel barges traded at a $0.75/mt premium to the front-month ICE low sulfur gasoil futures Wednesday, moving from discounted territory for the first time since May 6, when the premium was $0.50/mt according to Platts data.
Traders mainly attributed this move to the July ICE low sulfur gasoil future contract's expiry Friday, which is causing convergence between the FOB ARA diesel barge quote and the front-month ICE low sulfur gasoil futures.
Meanwhile, in the swaps market, the 0.1% gasoil ARA barge balance month swap also strengthened in tandem with the physical, assessed at a one-month high of minus $6.00/mt Wednesday.
This equaled the highest assessed discount since the change in specification of ICE gasoil futures in January.
--Eline Potie, eline.potie@platts.com
--Maude Desmarescaux, maude.desmarescaux@platts.com
--George Shaw, george.shaw@platts.com
--Jhoan Cordoba, jhoan.cordoba@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com