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Gasoil backwardation in Europe remains stubbornly high

Backwardation to Mar is nearly $30/mt and nearly $90/mt to Sep with Dec showing $116/MT. Clearly with 77% of the backwardation focused through Sept, it appears traders expecting some serious tightness in gasoil to remain throughout summer. The ICE gasoil contract expired at $913 and today we are trading the Mar $40/mt lower so volatility can be expected! Stocks of gasoil are reasonable in ARA at 1.86 mil mt while freight remains expensive from Asia despite a rather noticeable drop in freight to EU from Asia last week. Still traders not moving cargo to Europe from Asia despite very high cracks for diesel $45/Barrel which means that both supply and demand are still very cautious. Biodiesel crush margin like gasoil cracks have improved again we can see that FAME 0 is only slightly backward through Q3 at +52 yet RME remains strongly backward in the front with q1/q2 showing +$91/mt yet Rapeseed oil prices are flat through Oct. With RME/F0 spread at +58, we should expect parity soon as spring deliveries of summer biodiesel begin. All eyes are on geopolitical issues in gulf of Aden but clearly we are stocking up diesel in Asia and any resolution of the conflict could cause major adjustments in gasoil pricing and cracks of course.

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