Gasoil fell on the ICE Futures Europe exchange in London as Brent crude declined. The strong backwardation in the gasoil market in Europe and the U.S. is “unsustainable” as increased supplies from refineries cause inventories to grow, according to Bank of America Corp.
Gasoline barges for loading in Amsterdam-Rotterdam-Antwerp traded at $1,010 and $1,012 a metric ton, according to a survey of brokers and traders monitoring the Argus Bulletin Board. That’s the lowest since Feb. 3 and compares with May 11 deals at $1,013 to $1,022.
Litasco, OAO Lukoil’s trading arm, was the biggest buyer of the Eurobob grade to which ethanol is added to make finished fuel. Trafigura Beheer BV was the main seller. The trades are typically for lots of 1,000 tons or 2,000 tons.
Naphtha’s discount to Brent narrowed to $9.44 a barrel from $9.78 in the previous session, PVM data show.
Gasoil for delivery in June dropped 1.9 percent to $933 a ton as of 12:36 p.m. London time on the ICE exchange. The July contract was at $931.25. That narrows the discount to front- month futures, or backwardation, to $1.75 from $3.50 on May 10.
The August contract was at $929.75 a ton, according to ICE data, making it attractive to buy, according to Bank of America.
“Selling gasoil in July and buying the August contract looks like an appealing trade to us, as we believe the current strong backwardation in the gasoil market will become unsustainable once inventories start to build,” Sabine Schels, a Bank of America analyst in London, said in a May 11 report.
Gasoil’s crack, a measure of refining profitability, fell to $14.63 a barrel from $14.94 on May 11, according to ICE data. Brent decreased 1.3 percent to $110.79 a barrel.
Money managers cut net-long bets on ICE gasoil futures and options to 59,457 in the week ended May 8 from 79,873 in the previous week, ICE data show.
Royal Dutch Shell Plc (RDSA) completed maintenance at its Godorf oil refinery in Germany yesterday, the company said today in an e-mailed statement. The planned works began on May 5. The refinery can process 186,000 barrels of crude a day, according to data compiled by Bloomberg.
OMV AG (OMV) expects processing rates to return to normal today at its Burghausen refinery in Germany after an external power failure on May 10 caused an “unscheduled disruption of operations of major parts” of the facility, the company said in an e-mail. The plant can process 72,000 barrels of crude daily.
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