ICE Gasoil Deliveries at Nine-Year High as Diesel Spread Shrinks

Deliveries of gasoil jumped to the highest in at least nine years on the ICE Futures Europe exchange as premiums of higher-value diesel slumped in the region this year.

The amount of 0.1 percent sulfur gasoil for February shipment surged to 629,700 metric tons, the most since at least January 2004, the earliest available data, according to Intercontinental Exchange Inc.’s website. That compares with 66,300 tons last month and 46,100 tons a year ago.

Deliveries were boosted by import-tenders from North Africa, demand for the higher sulfur grade in the Mediterranean region and a drop in diesel premiums in northwest Europe, said Miles Lang, an analyst at Facts Global Energy Inc. in London.

“Multiple parties are involved in the deliveries for February 2013 and the gasoil contract has managed similarly high delivery levels in the past,” said Claire Miller, a spokesman for the exchange. She declined to comment on specific participants involved in the deliveries.

Ultra low-sulfur diesel fell to a premium of $3 a ton to gasoil futures on Feb. 5 in the Amsterdam-Rotterdam-Antwerp oil hub, the lowest since November 2009, according to data compiled by Bloomberg. That compared with an average $26.44 last year, the data show.

The smaller premium for diesel means traders are able to blend cheaper, high-sulfur gasoil to meet ICE specification, according to four traders of the products.

Narrow Spread

The ICE-traded spread between February and March gasoil contracts narrowed by almost $8 a ton from 8:00 a.m. and 11:30 a.m. London time, to about $4 a ton. It then widened briefly to about $9.50 and shrank to $1 a ton by the February contract expiry at 12:00 p.m., according to ICE data.

February gasoil expired at $1,026.25 a ton. The March contract dropped $4.50, or 0.4 percent, to $1,010.50 as of 5:08 p.m. London time.

Hedge funds and other money managers raised net-long bets on gasoil for a seventh week to 91,036 contracts in the week ended Feb. 5, according to data from ICE published yesterday.

February deliveries on the ultra-low-sulfur gasoil contract, which has the same maximum sulfur level as diesel, increased to 47,000 tons from 35,600 tons last month and 20,800 tons a year ago, according to ICE data released today. That grade contains no more than 10 parts per million of sulfur.

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