This news is classified in: Traditional Energy Sustainable Energy Natural Gas & LNG Power Generation
Dec 9, 2015
Diesel prices in Europe have fallen to an 11-year low amid falling crude prices and an oversupply of product.
A sharp drop in crude prices since the start of this month has pushed outright prices for gasoline, jet fuel and fuel oil to levels last seen in 2008-2009. An acute oversupply of diesel has caused prices of the product to fall to levels seen even further back.
French diesel prices in northwest Europe settled at $366.75/t yesterday. The last time prices settled lower was on 14 July 2004, when they hit $364.50/t.
European governments have been promoting diesel use for the last 20 years, while European refiners, who have been structurally short of diesel, have invested in long term projects to upgrade their facilities to maximise diesel production.
But the situation has now reversed; diesel supplies are ample while crude oil prices are low. Refineries in Russia, Asia, the Mideast Gulf and the US are all producing diesel that is being exported to Europe. And European refineries are keeping diesel production high as crack spreads, though on the decline, are not low enough to slow down production, and light product margins remain firm.
As diesel prices trend lower, the market contango is pushing wider. The second-month Ice gasoil futures premium to the front-month Ice gasoil futures contract settled at $9.50/t yesterday, up from $3/t a month ago.
