The spread between the front-month and second-month ICE low sulfur gasoil (LSGO) futures widened to an $11/mt contango intraday Tuesday, before retreating to $10/mt by 1140 GMT.
This was the widest contango recorded all year, according to Platts data, and comes at a time of significant oversupply in the diesel and jet markets.
Market participants said that they haven't seen such low prices in 15 years and that the market is firmly headed into floating storage territory, with some vessel names already being circulated in the market.
Water levels on the Rhine, a key shipping artery used to transport oil products to Germany, France, Switzerland and Eastern Europe, are set to fall later this week, backing out more volumes into the Amsterdam-Rotterdam-Antwerp trading hub and worsening the oversupply.
"There is no hope," a diesel trader said. "US arb [flows are] still coming, Germany has no import requirements due to good local supply with [good] margins for German refineries and relatively high stocks."
"I see no hope for at least December," the trader added. "[There are] so many cargoes in the market and no buyer."
A second trader said: "It's an incredibly weak market, all because of OPEC. Traders have to bail out before Christmas."
As Europe struggles to find space for its barrels, there are little to no expectations that fundamentals will improve in the short term.
In spite of lacking appetite from Germany, European traders were keeping an eye on Rhine water levels which, after a period of relief, were expected to fall again, constraining delivery into inland markets again while taking away a significant outlet for the barrels piling up in Amsterdam-Rotterdam-Antwerp.
At its 168th meeting in Vienna last week, OPEC decided to keep pumping crude, sending outright oil prices to a near seven-year low Monday.
