The 0.1% NWE CIF differential to ICE October gasoil futures closed up $3.75/mt Tuesday at plus $3.25/mt, an increase of $7.50/mt since the differential fell to minus $4.25/mt on August 25, according to Platts data.
Trading house Hetco bid Tuesday for a 10,000 mt cargo CIF basis Hamburg for delivery September 16-20 at plus $1/mt, while ConocoPhillips for the second day in a row bid for a 10,000 mt cargo CIF basis Le Harve at September flat.
"Storages are building [in NWE] to project forward what's going to happen," a NWE cargo trader said, highlighting the expected buildup in inventories as winter approaches. "German stocks should be up 2% at the end of this month to around 58%. No big wave, but steady absorption," the trader
added.
Sources also attributed demand into Germany to a wide spread between 0.1% gasoil and ultra low sulfur diesel.
One trader said that the "50 ppm heating oil market is very related to 10 ppm market as refiners only make two grades, 0.1% and 10 ppm."
"So if the spread between the two is wider than German 50 ppm subsidy, 0.1% will be bid," he added.
Since 2009, Germany has been subsidizing 50 ppm sulfur gasoil to encourage a move towards the fuel. At present, the subsidy is Eur15/cubic meter, which equates to approximately $22.75/mt. The spread between the 0.1% CIF NWE and ULSD CIF NWE quotes was $26/mt at Tuesday's close.
China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html
