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Europe Product Swaps: Refinery Cuts Support Diesel

Maritime Activity Reports, Inc.

June 9, 2014

European diesel swaps have recovered some ground over the past week following sharp declines as local refiners were set to lower production in the face of huge import volumes.

More than 2 million tonnes of diesel are set to ship from U.S. Gulf Coast refineries to Europe in June, as well as large volumes from Russia, traders said. The ample supplies, together with lacklustre demand, have put diesel prices under growing pressure in recent weeks, forcing European refineries to curb production. "The meltdown in middle distillates... makes some sort of supply rationalisation increasingly likely in Europe," said analysts at London-based consultancy Energy Aspects.

Gasoline and naphtha swaps weakened slightly with weaker demand on the U.S. East Coast and from the petrochemical industry. "Global light end markets have not yet succumbed to the deep sell-off gripping diesel, but pressure is mounting on the top of the barrel from weakening petrochemical demand for naphtha," Energy Aspects said.


The June gasoline barge swap was trading at $1,005.74 per tonne fob ARA, down slightly from $1,008.18 last week. The July swap was at $995.29 a tonne, down from $1,003.64. The May barge crack swap was trading at around $11.13 a barrel, little changed from last week.   


The June cargo swap was trading at about $928.98 a tonne cif NWE, down from $939 last week. The July swap was trading at $917.02 a tonne, up from $913.54. The June crack swap was at minus $4.20 a barrel, slightly stronger than last week's minus $4.37. The East-West spread for June widened to about $11.75 a tonne from about $7.75 last week.  

The June ICE gasoil futures contract was up $2.00 at $886.00 a tonne. The May-June gasoil contracts <LGO-1=R> were in a contango of $2.25 a tonne, $1 wider than last week. The June gasoil barge swap traded at $895.31 a tonne fob ARA, up from $889.51. The June diesel barge differential swap was about $9.26 a tonne fob ARA, stronger than last week's $8.75. The July barge swap was at around $10.38 a tonne, up from $9.50. The June diesel cargo differential swap was about $11 a tonne cif NWE, up from $10.25 last week. The July swap traded at around $11.50 a tonne. The June Mediterranean diesel cargo differential swap was at about $13.75 a tonne cif Med, up from $11.87.


The June jet fuel cargo differential swap was at $57.50 a tonne cif NWE, up sharply from last week's $38.63 a tonne. The July differential swaps was at a $57.63 tonne.

The premium on fuel oil with 1 percent sulphur content over fuel oil with 3.5 percent sulphur, known as the hilo, was about $46.63 a tonne for June, down from $49.49 last week. The hilo for July was at $45.48 per tonne.

Reporting by Ron Bousso

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