July LSG expires with very low volume of open interest

Quantum Commodity Intelligence - July Low Sulfur Gasoil (LSG) futures expired Monday with very little open interest left in the contract, reflecting the lack of demand in ARA for barrels amid an influx of cargoes from east of Suez and the US.

Just 554 lots of open interest were remaining, or 55,400 mt of ultra-low sulfur diesel needing to be delivered in ARA over the second half of the month.

Although demand for diesel, Europe's most consumed product, continued to improve, Europe has seen an influx of diesel carrying cargoes, including very large crude carriers, from the Middle East, Asia, and the US Gulf to fill tanks, sources said.

The nearby Low Sulfur Gasoil futures curve remains in mild contango, although the structure flips into backwardation in October.

Cracks for Low Sulfur Gasoil futures in August, combining August and September contracts, have shed around $1/b since coming under pressure in mid-June, Quantum data shows.  

This was the second month in a row of low expiry volumes.  

Just 250 lots of open interest were left after June LSG expired, the lowest expiry volume since ULSD replaced gasoil as the basis of the futures contract in February 2015.

The July 2020 LSG contract expired with 3,185 lots of open interest left, which would be a typical volume.