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LSEG data show that the price gap between east and west for diesel in July is at its widest level in two-and-a half years.

LSEG data on Thursday showed that the immediate July price differential between diesel prices in Asia & Europe widened to a discount near $120 per metric tonne, its largest in slightly over 2-1/2 years.

According to data, the last time the exchange of futures swaps (EFS), the price difference between ICE Gasoil Futures and Singapore Swaps, reached this level was at the end October 2022.

The ICE Gasoil Futures Contract for July expires later this Thursday. As of 0830 GMT, the August EFS had a discount per metric tonne of $35.

A larger EFS spread is likely to encourage swing suppliers from India and the Middle East, to send their cargoes over to Europe in order to take advantage of higher prices.

LSEG's shiptracking data shows that most of the cargoes from the Middle East, India and other countries bound for West of Suez markets are loaded in the first half of July.

James Noel Beswick, analyst at Sparta Commodities, said that the unprecedented rise in European diesel prices created arbitrage opportunities for sending supplies from Asia and the U.S. Gulf Coast to Europe.

A Singapore-based trader stated that the large backwardation of ICE gasoil contracts could pose a risk, as it could reduce the prices of their cargoes when they reach Europe during the second half of July or August.

Backwardation is a market structure in which prices for immediate months are higher than future months.

The July/August ICE Gasoil Spread The price of Russian oil is $110 per tonne, which is the highest since October 2022, when the European Union placed an embargo against Russian oil following the Ukraine War.

August/September Backwardation is $16-17 per ton. Reporting by Trixie YAP, Editing by Louise Heavens & Florence Tan

(source: Reuters)