The Platts 0.1% CIF Mediterranean gasoil assessment nudged down again Tuesday, feeling pressure from the low diesel differentials.
Traders said they expected the markets to bounce back with more diesel buying in Northwest Europe, as more rain in recent days is increasing the Rhine water levels allowing for more product transportation and therefore more supply into demand areas in the region.
On Tuesday the 0.1% CIF Med assessment stood at ICE December gasoil futures plus $0.75/mt. This value was down from three straight trading days of a differential of $1.50/mt to the December contract.
Meanwhile, the 10 ppm sulfur diesel assessment nudged up Tuesday to plus $24.50/mt over the same contract, from plus $23/mt Monday. The 10 ppm diesel market has recently been at its lowest levels in more than a year, since when it was assessed at plus $21.75/mt on November 22, 2010, according to Platts data.
"The problem is with the arbs from left to right, mainly for ULSD but obviously this is having an effect on the gasoil market," one middle distillates trader said, adding that recent flows or arbitrage cargoes have put pressure on market values.
This week, the low water levels on the Rhine, which have been another bearish factor for the diesel market, could be poised to change, with more rains expected in the region, according to the traders.
The overall demand in the Med continues to be strong for both diesel and gasoil, the traders added. But more supply of diesel has put pressure on the low sulfur product differentials and pulled the gasoil ones, the traders added.
"When I look at the [desulfurization] differential on November 1, for example, it was $31.75/mt and at the weakest point in November it was at plus $6/mt," the first trader added.
Desulfurization margins started to bounce back in the recent days as gasoil started to keep pace with diesel, Platts data show. The margin stood on Tuesday at plus $23.50/mt.
"Diesel up, so gasoil [will go] up as well. It seems there will be decent demand on the both again. Diesel is up on the back of higher Rhine waters. The levels are recovering much faster than expected, so barges and after that CIF NWE and CIF Med will be affected positively," another middle distillates trader said.
