European prices of 50ppm sulfur fuels slide as demand dries up

London (Platts)--25Aug2005

Prices of low-sulfur, or 50ppm, gasoline and diesel in northwest Europe
are continuing to slide against cleaner, sulfur-free products as demand for
the higher sulfur fuels tails off across the region, traders said.
     The differential in value between 10ppm, or sulfur-free, and 50ppm sulfur
gasoline barges in the trading hub of Amsterdam-Rotterdam-Antwerp is
continuing to widen. In early trade Thursday VDS sold a 50ppm gasoline barge
to Petrotrade at $638/mt, with traders saying this level was at least $8 to
$10/mt beneath the expected level of 10ppm sulfur gasoline barge trade. 
     Starting with Germany in 2003, most EU states have now introduced duty
incentives to encourage motorists to switch to sulfur-free or 10ppm gasoline
and diesel over the 50ppm products.
     "There is no barge demand for 50ppm gasoline," one gasoline trader said.
"It is this simple, if you have 50ppm to sell you will have to discount
heavily to 10ppm. To sell 50ppm now you are talking selling at maybe $10/mt
under 10ppm," the trader added.
      Traders said in terms of pure production costs, however, the
differential between 10ppm and 50ppm gasoline was closer to $2/mt. 
      Meanwhile, in the diesel barge market, 50ppm product was pegged $6/mt
lower than 10ppm, at the close Wednesday. The same spread was valued at
$2.50/mt at the end of business Tuesday. The decrease in the value for 50ppm
against the sulfur-free product was primarily due to The Netherlands switching
from 50ppm to 10ppm July 1. Some have suggested that the spread will widen
further because both Germany and The Netherlands have a tax break of $10/mt
for 10ppm.
      Demand for 50ppm gasoline cargoes in Europe remains strong, with good
levels of demand heard into the UK, however cargo traders reported problems
acquiring cargo sized lots of 50ppm gasoline for loading onto a cargo at
anything like the discounts seen for 50ppm barges. 
     "Cargo traders can't understand why 50ppm barges are so much under 10ppm,
because they can't buy at those levels. If you want to buy 10,000mt of
50ppm you won't be able to get $10/mt under, but if you want to sell a 1,000
mt barge [of 50ppm] you will have to sell at $10/mt under. The two markets
are dislocated," one trader said.

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