Ultra low sulfur diesel premiums in the northwest European CIF cargo market fell to $11.25/mt above May 0.1% ICE gasoil Futures Friday, their lowest since January 28 according to Platts data, after a sharp $3/mt fall in the cash premium seen on the day.
With US exports to Northwest Europe and the Mediterranean expected to remain firm relative to last month at 1.4-1.6 million mt, according to sources and vessels tracked, and with refineries returning from maintenance, strong supply has put downward pressure on premiums, reflected in the May ULSD CIF NWE cargo swap which has fallen $10.50/mt over the month to $15.75/mt Friday.
Weaker spot and paper premiums in the Northwest European cargo market were not expected, however, to discourage the flow of product from the US, according to sources.
"Early in the month the arb was open, but the second half [of the total monthly volume expected] will still come I think, much of that flow is structural now, it has to come," one trader said.
With most cargoes now pricing against the June futures contract for delivery 10-15 days forward, traders said forward curve structure was also a contributor to Friday's fall in the diesel premium. Backwardation in the ICE gasoil futures contract closed at $5/mt between front- and second-month futures Friday.
With cargo premiums falling and market backwardation negating visible storage opportunities in the prompt, spot suppliers in ARA continued to favor the FOB barge market as an outlet for their product, sources said.
FOB Rotterdam barge premiums have priced above cargoes four times over the past month, supported by prompt buying interest, and remain closely priced at a $1.25/mt discount to CIF cargoes Friday.
Cargoes typically trade above barges due to the inclusion of loading costs, insurance and freight rates in their price.
