Front-month gasoil futures dipped into contango today after settling in backwardation for almost seven weeks, amid declining demand for the heating fuel as the European winter season comes to an end.
Gasoil for delivery in March was 50 cents cheaper, or in contango, to April as of 4:04 p.m. London time on the ICE Futures Europe exchange. The contract, used as a benchmark for European heating oil, diesel and jet fuel, lost $21, or 2.2 percent, to $957.75 a metric ton.
Front-month gasoil has settled at a premium, or in backwardation, to the next month contract since Jan. 10. Backwardation is a market structure that may signal falling near-term supply or rising demand.
“On the fundamentals side, we are slowly moving into a season of low heating oil and diesel demand,” Abhishek Deshpande, an analyst at Natixis SA in London, said today in an e-mailed response to questions. “There does seem to be ample supply due to refineries on high utilization rates just before they go offline next month for seasonal maintenance.”
The change in the price structure also came as independent gasoil inventories in the Amsterdam-Rotterdam-Antwerp oil hub held at 8 percent above the five-year average in the week to Feb. 21, according to data from PJK International BV, a researcher in the Netherlands.