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5 Jun 2013
No shortage of diesel in sight – Merrill Lynch and BoA
FXstreet.com (London) - In the view of the research teams at Merrill Lynch and BoA, the medium to long-term fundamentals point to bearish developments for the mid distillate complex, particularly in Europe, as supply is outstripping weak demand in the Atlantic Basin.
While, they say, in the short-term strong demand in the Mediterranean could still provide some support to ICE gasoil cracks, they believe demand will struggle to absorb the stronger supply. Thus the team advocates selling long-dated gasoil cracks for this winter or for CAL 14, which currently sits at $17/bbl. In addition, they believe the forward curve for gasoil will start to build in a wider contango again relative to forward winter contracts for 2013/14.
While, they say, in the short-term strong demand in the Mediterranean could still provide some support to ICE gasoil cracks, they believe demand will struggle to absorb the stronger supply. Thus the team advocates selling long-dated gasoil cracks for this winter or for CAL 14, which currently sits at $17/bbl. In addition, they believe the forward curve for gasoil will start to build in a wider contango again relative to forward winter contracts for 2013/14.