London (Platts)--25Nov2010/824 am EST/1324 GMT

The European gasoline market remains physically very tight, with a well supported backwardated structure in the over-the-counter market, trading sources said Thursday.

In the over-the-counter market, Eurobob crack spreads--the difference between the refined product and the price of crude--have risen by about $1/barrel since Tuesday to around $5.10/b for December, sources said Thursday.

On a flat price basis, this puts the December swap around $762.75/mt.

Physical Eurobob gasoline barges were assessed at a $19.75/mt premium to the December swap on Wednesday, this compares with a premium of $12.50/mt Tuesday and $8.50/mt on Monday.

Eurobob barges were assessed at $771/mt or $7.38/b on a crack basis. This is the highest physical crack since October 18, when the crack was $8.43/b.

In addition, the backwardation between December and January in the OTC market--as indicated in the time spread between flat prices for the two months--has widened in recent days.

Thursday morning, the backwardated spread between the two months stood at around $5.50/mt, compared with $4.50 on Wednesday, $2/mt on Tuesday, and a contango of $4/mt at the start of November.

The strengthening in the paper market has come about following an underlying prompt tightness in the physical market, sources said.

Both the US Atlantic Coast and European gasoline markets have been characterized by a backwardated structure in recent months, which has rolled from month to month.

The market has been relatively tight, with the backwardated structure leading to traders having limited material in storage, sources said.

When the market sees disruption to supply, this has a stark impact, as a fall in supply cannot be accommodated, with material being brought from out of storage, sources added.

"With the structure in Europe, everyone clears out their tanks, they live from hand to mouth," a trader said.

In the US, this tightness has been seen in New York Harbor with around four refineries that supply the market out of action, leading to a rise in demand for material into the region, which has drawn supplies from out of Europe, traders said.

This in turn has tightened the European market, with the news Wednesday that the fluid catalytic cracker at Shell's Pernis refinery will remain in turnaround through December adding to European tightness, traders said.

"The physical is well bid, news from Pernis leads to the front being well supported," another trader said. "There is still a hangover from French strikes and US RBOB is strong," he added.

--Daniel Colover, daniel_colover@platts.com

Similar stories appear in European Marketscan. See more information at http://www.platts.com/Products/europeanmarketscan