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Diesel slumps in Europe amid Russian, US imports

05.22.2014  | 

“Diesel prices have wallowed amid poor European demand and rising Russian supply, with few signs of either trend letting up,” analysts at Energy Aspects, a researcher in London, said in a report.

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By LANANH NGUYEN
Bloomberg

European diesel will probably stay depressed this summer after plunging to the lowest for this time of year since 2003 amid surging imports from Russia and the .S.

Barges of diesel traded at $9/ton more than the June gasoil contract on the ICE Futures Europe exchange on May 19. That’s the lowest premium in more than three months and a drop of 66% from April 15, according to data compiled by Bloomberg. Gasoil’s crack spread, a measure of profit to be made from refining the fuel, declined 18% since mid-April to about $12/bbl on the ICE exchange.

“Europe looks extremely well supplied,” Steve Sawyer, an analyst at FGE, a consultant, said by phone from London. “I would expect both Russian and US refiners to be pushing their rates during the summer and looking to Europe to dispose of the product.”

Diesel premiums in Europe typically rise in May as traders buy supplies in anticipation of peak driving demand from tourists and truckers, said Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England. This year “there’s nothing which can support diesel,” with demand weak and supply increasing, he said.

While diesel barges recovered from their earlier low to trade at a premium of $11/ton to June gasoil in the Amsterdam- Rotterdam-Antwerp oil hub on May 20, according to data compiled by Bloomberg, this year an abundance of shipments from other regions will probably overturn the usual seasonal pattern.

Imports Surge

“Diesel prices have wallowed amid poor European demand and rising Russian supply, with few signs of either trend letting up,” analysts at Energy Aspects, a researcher in London, said in a report.

Europe’s imports of diesel and gasoil from countries of the former Soviet Union averaged about 629,000 bpd so far this year, up from 559,000 in 2013, FGE estimated. Shipments from the US to Europe have risen to about 321,000 bpd in 2014, from 304,000 last year, with flows doubling in January and February compared with 2013, according to FGE.

The continent’s diesel surplus may prompt European refiners to respond by cutting production, analysts at researcher JBC Energy GmbH in Vienna, led by David Wech, said in an e-mailed note.

“Pressure is coming from all fronts,” JBC said. Summer is “unlikely to provide much room to the upside.”



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