Northwest European CIF delivered gasoil cargo prices have fallen to their lowest premium to FOB delivered barges in more than two months, with continued selling interest in the larger cargo market while barges remain rangebound.
CIF delivered Amsterdam-Rotterdam-Antwerp 0.1% sulfur gasoil cargoes were assessed by Platts at $825.75/mt Friday, $5.50/mt above FOB Rotterdam barges.
This represented the narrowest price difference between the two prices since July 1 and an unusual trend given the difference between the products' shipping terms, with freight costs a large component of that difference.
The NWE CIF gasoil cargo market has been under pressure of late following an inflow of volumes to the region combined with a decrease in the demand for storage, as well as low demand for conventional heating oil and export grades.
Several large arbitrage cargoes from the east as well as large parcels from the Baltic region -- some as large as 130,000 mt on single Suezmax vessels -- have made their way to ARA over the last few weeks but have struggled to sell into the cargo market.
Most traders have resorted to putting these gasoil volumes into storage over the last two months, amid more attractive storage opportunities on the ICE gasoil futures carry, with most of the demand for the product as of late attributed to the contango structure.
However, traders said that a decrease in storage capacity along with weak fundamental demand for heating oil has led to some companies struggling to sell their extra volumes.
In addition, export outlets for gasoil have decreased significantly over the last few months, with less demand from places like Argentina and West Africa.
Meanwhile, Rotterdam barge physical cash premiums have remained relatively rangebound, with trading activity mostly driven by product changing hands between those with little storage capacity hoping to make room for additional cargoes and buyers with extra ullage space.
"It's definitely storage demand in ARA. I know people need to make some room in their tanks but it's looking more and more full...if we keep running out of space I expect there will be some movement in the barge market," said one trader.
