An increase in demand for gasoil from the US East Coast, West Africa and South America, as well as a closed arbitrage for diesel from the US into Europe have resulted in less product being stored in the Amsterdam-Rotterdam-Antwerp region, with some product even being drawn from storage, shifting the ICE gasoil futures curve into backwardation between the November and December contracts.
The front-month 0.1% ICE gasoil futures structure closed in backwardation at 16:30 London time Friday for the first time since May 27, with the November contract at $741.50/mt, $0.75/mt above the December contract.
"The US is pulling barrels from Europe, [the backwardation] it's a combination of less diesel coming in and more gasoil going out," said one trader.
"Basically I think we're at export levels on the gasoil. There will also be some local demand in the winter -- so either it's going to go for export or consumption but it's going to be sold," said another trader.
Several traders expect sharper increases in storage draws following a drop in resupplies from the Baltics, adding that the backwardation could hold for at least a month, until all refineries in the region are back online.
Despite stocks having been drawn in the last few weeks, according to a stocks report from BNP Paribas released Friday, distillate stocks, comprising both gasoil and diesel, were mostly unchanged week on week, and remain 35% above last year's levels and 22.1% above the five-year average.
