January 29, 2014 / 5:25 PM / 4 years ago

Europe Distillates-Diesel diffs up after U.S. stocks fall

LONDON, Jan 29 (Reuters) - Diesel barge differentials in northwest Europe rose slightly on Wednesday after data from the United States showed that distillates stocks had fallen by twice as much as expected after cold weather gripped the country.

The Energy Information Administration said stocks on the U.S. East Coast had fallen to their lowest level since April 2008.

Traders and analysts said that heating oil shortages on the East Coast due to the prolonged spell of severely cold weather could trigger more shipments of gasoil and kerosene from Europe, supporting prices.

Several shipments have already made the trip after the arbitrage to the United States opened. “Vessels were being diverted to the United States because the HOGO spread was so wide,” a broker said.

The HOGO , which has been at multi-year highs, is the difference between the front month U.S heating oil futures contract and ICE gasoil futures.

A trader added that the backwardation in U.S. heating oil futures was making it difficult to lock in the best prices. “It’s very tight there, but it’s difficult to capture as people are running hand to mouth,” he said.

In the Mediterranean market a trader said that demand from Turkey had slowed this week but it was unclear if this was linked to currency depreciation and the broader turmoil hitting emerging markets with large current account deficits.

“Demand is down and production is generally up so the market seems long on the front,” he said.

In refinery news, Valero’s 270,000 barrels-per-day Pembroke plant in Wales will start a two-week maintenance on its vacuum distillation and visbreaking units in the first half of February.


* No barges of 0.1 percent gasoil traded. Bids and offers came at discounts to February ICE gasoil futures of $1-$2 a tonne fob ARA, slightly weaker than on Tuesday.

* No barges of 50 ppm traded either. An offer came at a $5 a tonne fob ARA premium to February ICE gasoil futures.

* At 1643 GMT, February ICE gasoil futures were up $4.50 at $922 a tonne.

* The ICE gasoil crack was at $15.26 a barrel, up slightly from $15.04 a barrel on Tuesday.

* The February and March ICE gasoil futures contracts were in a backwardation of $5.50 a tonne, out from $5 a tonne on Tuesday.


* Nine diesel barges traded at premiums to February ICE gasoil futures of $8.50-$10 a tonne fob ARA, firming from $8.50 a tonne on Tuesday.

* Shell, AIC, Noble and SK Energy were on the sell side, while TPR, Morgan Stanley, Hetco and Phillips 66 were buyers.


* No barges traded. A bid came at a premium to February ICE gasoil futures of $61 a tonne fob ARA.

* No cargoes traded either. A bid came at a premium to February ICE gasoil futures of $67 a tonne cif NWE.


* Barges of low-sulphur fuel oil (LSFO) with 1 percent sulphur content were discussed at $590-$607 a tonne fob ARA, in line with Tuesday’s trades at $599 a tonne.

* Barges of high-sulphur fuel oil (HSFO) with 3.5 percent sulphur content traded at $567-$572.50 a tonne fob ARA, in line with Tuesday’s $568-$571.50 a tonne.

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