The differential for CIF 0.1% sulfur Northwest European gasoil cargoes to the front-month ICE low sulfur gasoil futures contract slumped to a seven-and-a-half month low Thursday, as warmer-than-usual temperatures and a overhang of product in end-user tanks weighed on the market.
Platts assessed the differential at a discount of $12.00/mt to the front-month gasoil futures contract Thursday, the lowest since March 24, when it was assessed at the same level.
Traders attributed the weakness to the unseasonably warm temperatures across the region and to a surge of buying in August and September, precipitated by a lower outright price, which have taken much of the demand out of key consuming countries such as France.
"[There's} no demand for heating oil," a trader said. "It is not there with such temperatures."
While lower temperatures are obviously difficult to forecast, it remains the principal salve to the market's current weakness.
However, in its latest report, the International Energy Agency said that a repeat of last year's winter, which saw demand spike in the first quarter of 2015, would lead only to "minimal-to-muted gasoil demand growth," and a prediction that demand for gasoil would decrease slightly.
"We cautiously anticipate that a warmer European winter this year will trigger a marginal decline in European 1Q16 gasoil demand," the report said.
With depressed demand in Northwest Europe, cargoes from the main export location of Ventspils in Latvia of 500 ppm and 0.1% gasoil have been moving from the Baltic to the US Atlantic Coast and Puerto Rico, according to shipping sources.
