NWE 50 ppm-0.1% gasoil barge spread narrows to record level

London (Platts)--6May2011/857 am EDT/1257 GMT


Weakness in the Northwest European 50 ppm gasoil market resulted in the product's spread to 0.1%--or 1,000 ppm sulfur--gasoil barges reach its narrowest level Thursday since the 50 ppm barge assessment was launched at the start of the year, Platts data show.

The spread between 0.1% gasoil FOB Rotterdam barges and 50 ppm gasoil FOB Amsterdam-Rotterdam-Antwerp barges fell to $9.75/mt, the first time the difference has been in the single-figure territory.

Since the end of winter, the 50 ppm gasoil market in Europe has collapsed, with a high outright price and the warmer weather combining to stymie any demand into Germany, the principle buyer of 50 ppm gasoil as a heating fuel in Northwest Europe.

"The 50 ppm market is absolutely dead. When there is demand we sell a lot of it but there is no downstream demand currently," one ARA supplier said Friday.

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"With flat price being well above $1,000/mt recently a lot of the downstream buyers don't have sophisticated enough systems to cover the cost and financing fees of holding oil at those levels," he added.

Furthermore, low water levels along the Rhine--currently just 89 cm at Kaub--and high costs for moving barges have impacted demand from German wholesalers, a source said.

Equally, the lack of demand for 50 ppm gasoil has widened the spread to 10 ppm--ultra low sulfur diesel--barges, with the difference shooting up from just $3/mt on April 19 to $10.75/mt Thursday, Platts data show.

ULSD and 50 ppm barges are very similar but have different demand streams. The fall in heating oil demand has had a stark impact on 50 ppm demand, in contrast ULSD demand has been more robust with a seasonal rise in both consumer and agricultural demand supporting ULSD barges leading to the wider spread between the two products, sources said.

A relative fall in availability of arbitrage material from the US Gulf Coast into the ARA region for blending down into ULSD barges has been a factor lending support to ULSD barge premiums to the ICE gasoil contract, a trader said.

Premiums for ULSD barges have risen by $6/mt since April 21 to be assessed at $17.25/mt on Thursday. In contrast, 50 ppm barges stand only $0.50/mt higher than on April 21, assessed at $6.50/mt on Thursday.

A seasonal uptick in demand for ULSD barges from both consumers and the agricultural sector has also supported premiums for ULSD, sources said.

--Rupert Rowling, rupert_rowling@platts.com

--Daniel Colover, daniel_colover@platts.com