LONDON, Nov 18 The forward curve of Europe's middle distillate benchmark ICE gas oil futures remained in a steep contango, as warm weather continued to depress demand for heating oil from Germany.
Traders said middle distillate volumes in floating storage are expected to rise to almost 100 million barrels in December. [ID:nSP42555]
"You've got a very depressed cash market and very warm weather -- Europe needs to experience a very big bout of cold weather to get the heating oil market moving with German stocks so high," one trader said.
"The high levels of floating storage are going to act as a break on this market -- distillates can stay at sea for a very long time without any reduction in quality, and when some contracts come to the end of their time offshore more product is getting rolled off to replace them."
Fuel oil prices in Europe rose on Wednesday, boosted by strong demand from shipping firms amid signs of a pick-up in the wider economy.
ICE GAS OIL
* December gas oil futures LGOc1 were $638.75.00 a tonne, up 1.12 percent by 1734 GMT.
* The contango to January was around $11.25 a tonne, firm from Tuesday and close to its widest level since early August. LGO-1=R NEWOILOIL
* The prompt crack eased about 20 cents to $7.65 a barrel. LGO-LCO1=R
* Brent crude futures LCOc1 rose 57 cents to $79.54 a barrel.
* Traders said relatively warm weather in Germany was dampening sentiment in the inland market.
* Swaps showed no signs of recovery in the differentials, with December at discounts of around $9/$10 a tonne fob ARA to benchmark and $7.50/$8.50 discounts for January for the second day running.
* Barges of gas oil with 0.1 percent sulphur were offered at discounts of $10 a tonne fob ARA to December ICE gas oil futures and bid at $11 discounts, compared with deals at $6/$8 discounts on Tuesday.
* In mid-November last year, gas oil barges traded around $0.50/$5 premiums to benchmark.
* In the Mediterranean, 0.1 percent sulphur was bid at December plus $5 a tonne cif, unchanged from Tuesday's deals.
* The East/West spread swaps were $2.50/$3.50 premiums for Europe in December, suggesting the arbitrage imports from Asia may be limited on paper.
* In the Mediterranean, Eni continued to be on the buy side. It was bidding the French winter spec at December plus $13 a tonne cif, for the second day running.
* The French winter spec in Northwest Europe has remained at slight discount to the Mediterranean since late last week. UK spec was bid relatively actively at around plus $19 a tonne cif.
* French winter spec was bid at December plus $12.75 a tonne cif NWE, up $1.75 from Tuesday.
* Jet cargoes were discussed between plus $49 and plus $53 CIF Rotterdam. Barges were discussed at December plus $42 and $44 a tonne fob ARA, steady from Tuesday.
* Swaps rose about $1 across the curve for the second day, with December at $49.50/$50.00 a tonne cif and $51.50/$53.50
FUEL OIL <EURO/DIFF/FO>
* High sulphur fuel oil (HSFO) barges with 3.5 percent sulphur traded at $459-$461 a tonne fob ARA, compared with $452-$454 on Tuesday.
* HSFO's crack to dated Brent was a little stronger at minus $5.75 a barrel from minus $6 a barrel on Tuesday.
* Fuel oil with 1 percent sulphur traded at $486 a tonne while 1.5 percent fuel oil traded at $479 a tonne. Both were up by around $7 on Tuesday's levels. (Reporting by David Sheppard; Editing by Sue Thomas)
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