Bloomberg News

European Gasoline Falls; ICE Gasoil Net-Longs Rise: Oil Products

March 05, 2012

Gasoline fell in northwest Europe as Total SA sold for a second day. The naphtha crack, or discount to Brent, narrowed.

Hedge funds and other money managers raised bullish bets on ICE gasoil futures by 8,459 contracts in the week ended Feb. 28, according to data from ICE Futures Europe.

Light Products

Gasoline (MOGEEURB) barges for immediate loading in Amsterdam- Rotterdam-Antwerp fell to $1,092 to $1,094 a metric ton, according to a survey of traders and brokers monitoring the Argus Bulletin Board. That compares with trades on March 2 at $1,096 to $1,110.

Total, Chevron Corp. and Hess Corp.’s Hetco unit were the sellers of the Eurobob grade, to which ethanol is added to make finished fuel. OAO Lukoil’s Litasco and Gunvor Group Ltd. bought.

The product’s crack, or premium to Brent crude, dropped 16 cents to $11 a barrel, according to data from PVM Oil Associates Ltd., a London-based crude and fuel broker.

Naphtha’s discount to Brent narrowed to $4.56 a barrel from $4.67 in the previous session, PVM data showed.

Middle Distillates

The number of net-long managed-money bets on ICE gasoil futures and options rose to 78,959 lots last week from 70,500 the week earlier, the ICE report showed.

March gasoil advanced $1 to $1,011.50 a ton on the ICE exchange as of 12:38 p.m. London time. Gasoil for April increased to $1,014.50.

That widened the spread between the two contracts to $3 a ton, compared with $2.50 on March 2. This structure, where the front-month is trading at a discount to the second-month, is known as contango and is a sign of weakening demand or increasing supply.

The fuel’s crack, a measure of refining profitability, was little changed at $12.35 a barrel. Front-month Brent rose 0.2 percent to $123.87 a barrel on the ICE exchange.

“If the gasoline crack has been able to provide some support to the refining margins, the margins are starting to suffer from the weakening trend in the gasoil crack,” Olivier Jakob, managing director of the Switzerland-based researcher, wrote in a report today.

“The level of contango at the front is similar to what was experienced in January or in February before the cold spell. They are not yet wide enough to provide full carry economics but winter is now basically over and with demand somewhat capped by the high flat price environment we could see stocks continue to rebuild in ARA,” he said.

To contact the reporter on this story: Rupert Rowling in London at rrowling@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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