December 29, 2011 / 5:50 PM / 9 years ago

UPDATE 1-Petroplus, low stocks to support distillates

* Gasoil margin rises to two-week high

* Europe will become more dependent on imports

* Other regional refiners could see benefits

LONDON, Dec 29 (Reuters) - The ICE gasoil future crack may strengthen further after rising to a two-week high on Thursday on worries that cash-strapped Swiss refiner Petroplus might be forced to shut refineries at a time of low European fuel stocks, traders and analysts said on Thursday.

ICE gasoil’s crack , or premium to Brent crude futures, hit an intraday high of $16.47 a barrel, the highest level since Dec. 12, according to Reuters data. By 1658 GMT, the crack was at $16.34 a barrel.

“The expectation of a potential shutdown of Petroplus’ refineries can already be seen in light and middle distillate cracks,” JBC Energy said in a note.

Analysts and traders said that middle distillates could drag the oil complex higher if Petroplus reduces output and winter demand continues while inventory levels are low.

“Heating oil is still the oil commodity to watch. Distillates (in the United States) are about 21 million below last year and 3 million below the five-year average,” said Dominick Chirichella, a senior partner at Energy Management Institute.

“This, coupled with low gasoil stocks in ARA and a lot of winter still left, could be the oil price driver over the next month or so.”

Lenders to Petroplus, the largest independent refiner in Europe, froze a credit facility of about $1 billion on which the company relied to buy crude oil.

Worries about its ability to get financing prompted Standard and Poor’s and Moody’s to cut the company’s credit ratings on Thursday.

“If the Petroplus system shuts down, the European distillates premiums have in our opinion more room for improvement,” Petromatrix’s Olivier Jakob said in a note.

“Europe will have to increase its imports of diesel from India and the U.S. Gulf ... To maintain the import economics of diesel to Europe, the European distillate physical premiums will have to be priced high enough,” he added.


Alan Gelder, Wood Mackenzie’s head of Oils Research, agreed, noting Europe would have to seek significant imports to balance the lost refining capacity if the company is forced to close its five refineries.

“(A closure) is not going to change the global refinery picture, but it will strengthen European diesel cracks in the short term and other fuel prices as buyers find alternative sources of supply,” Gelder said.

“The biggest impact would be additional diesel imports. Their (Petroplus’) 2010 output of diesel and gasoil was around 260,000 barrels per day, so this would be added to the approximately 600,000 bpd that is already imported into the EU.”

He added that a closure of Petroplus facilities in inland locations such as in Switzerland or France would help other regional refiners such as Exxon Mobil and Total .

European inventories fell this week, with data from Dutch analyst Pieter Kulsen showing gasoil stocks down at 2.022 million tonnes. This is the lowest since Nov. 11 and is below a year-to-date average of around 2.483 million tonnes, based on Reuters calculations.

Stockpiles are well below the levels seen at the same time last year of 2.858 million tonnes, with oil firms having little incentive to store products in a market structure known as backwardation in which the front month trades above other futures.

Other analysts have warned, however, against a bullish gasoil outlook after weekly stocks data on Thursday from the Energy Information Administration showed an unexpected build in U.S. distillate inventories.

“The ability of distillate stocks to increase in light of the winter demand season and the low run-rate signals difficulty ahead for the bulls in this market,” said John Kilduff, partner at Again Capital LLC in New York.

Distillate stocks, which include heating oil and diesel, rose by 1.21 million barrels, compared with expectations for a 500,000 barrel draw.

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