Spread between European distillates and Brent widens on crude losses

(London - Quantum Commodity Intelligence) - European distillate futures are outpacing the rise in Brent futures in early trade Thursday, extending their premium over crude futures after Wednesday's U.S. Energy Information Administration data showed a large build in gasoline stocks and crude prices dropped as a result.

The first and second contracts of Low Sulfur Gasoil futures were trading at $501/mt and $503.50/mt by the time of the 1630 Singapore close, up from $493.50/mt and $496/mt respectively at the prior day 1630 London close.

That rally creates a notional value for the balance-month April swap of $503.17/mt, a $7.59/mt ($1.02/bbl) increase from the 1630 UK close on Wednesday.

Oil futures slumped yesterday after the US Energy Information Agency reported a 4 million barrel build in gasoline stocks and a 1.5 million barrel-build in distillate stocks.

Crude stocks dropped 3.5 million barrels.

The spread between European distillate futures and Brent has widened sharply since the statistics were released.

Balance-month contracts in April for Low Sulfur Gasoil futures were valued $3.68/bbl higher than front-month Brent on April 6, but this spread widened today to $4.68/bbl.

Front-month Brent was trailing behind distillates, trading at $62.86/bbl at the 1630 Singapore close, up 87 cts/bbl from the 1630 London close on Wednesday.

Alongside the builds in gasoline and distillates inventories, implied gasoline and distillate demand also fell, causing jitters about the pace of oil demand recovery in the U.S.