Paper values for heating oil and gasoil had strengthened by the same margin since March 31, but the U.S. Gulf Coast cash ULSD basis fell by almost 4cts in the same time period.
The export flow to Europe from the Gulf Coast has almost completely stopped in the past few months due to poor arbitrage economics.
Early on Friday, a few ships, including a Large Range One 60,000-ton or 450,000-bbl capacity tanker, were rumored to have been booked for the transatlantic voyage at the end of April.
With the falling cash differentials on the Gulf Coast, traders said that the export economics are now marginally favorable. This may prompt some traders to make the transatlantic move, depending on cargo price and freight rates.
Within a week, ULSD cash basis on the Gulf Coast fell from as high as 4.25cts over the NYMEX screen last week to a premium of 50pts on Friday.
Like other regional markets, the Gulf Coast is facing ample supply from high refinery utilization rate. Traders noted that demand had failed to catch up with the supply hike.
On the other side of the pond, gas oil prices remain resilient. Gasoil has been the strongest market on both sides of the pond, Tom Bentz, an oil analyst with BNP Paribas, told OPIS earlier this week.
“A lot of positive economic data is coming out of Asia, signaling Asia is leading the economic recovery,” Bentz said.
Therefore, a recovering Asia should lead to more industrial demand for distillates and diesel. This could probably pull barrels from Europe to Asia.
On ICE, front-month gasoil was $705.25/ton or $2.239/gal on Friday, compared with $678.69/ton ($2.15/gal) on March 31.
On NYMEX, front-month heating oil was at $2.2194, up 7.8cts from March 31.
The strengthening heating oil futures are disconnected from the bearish cash markets as the U.S. has been experiencing a significantly lower-than-normal heating demand in the past 1-2 months.