European gasoline market remains tight, backwardation widens
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, email@example.com
Similar stories appear in European Marketscan.
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