Europe’s diesel markets are flashing signs of tightness, with near-term diesel contracts on Tuesday hitting the steepest backwardation–a situation where futures contracts for prompt delivery are more expensive than those further down the curve–since March. Backwardation is often interpreted as a sign of limited supply, with traders now willing to pay a premium for fuel that’s available sooner.
Hedge funds and other portfolio managers have been slashing their bearish bets on the European ICE gasoil futures amid falling temperatures and rising natural gas prices in Europe.