Europe Distillates-ICE gasoil strong, but demand elusive

LONDON, Feb 7 (Reuters) - ICE gasoil futures continued
to rally on Tuesday, supported by cold weather in Europe, but
physical barge differentials fell as end-user demand remained
elusive with traffic hindered by frozen rivers and canals.

February ICE gasoil touched intraday highs of $1,003
a tonne, levels not seen since early May 2011.

But traders and brokers said there was still little demand
coming through as consumers continue to draw down from their
existing heating oil stocks.

With sub-zero temperatures across Europe, ice is blocking
the river Danube in south Germany as well as a number of smaller
German canals.

"There is little demand but barges are tight and don't want
to go down to the south (of Germany) because of the ice," one
middle distillates broker said. "I am looking for a barge to go
down the Main but so far nothing."

She added that the Main was closed from the town of
Aschaffenburg in Bavaria, along with many of the channels.

Analysts at Deutsche Bank said that whilst a late season
cold snap tends to pack less of a punch and gasoil stocks are
generally healthy, a more severe cold period or consumer rush to
buy might strain the European gasoil balance given a heavy
refinery maintenance period this quarter.

Demand for gasoil remains strong in the Mediterranean with
Algeria drawing in large quantities to make up for a shortfall
in domestic production and to meet growing demand.

Its 335,000 barrel per day Skikda refinery will partially
close in early May for improvement works.

GASOIL

* Four barges traded in the window, at discounts to February
ICE gasoil futures of $0.50-$1 a tonne fob ARA. This was down
from Monday's trades which were flat to ICE gasoil.

* Vitol sold all the barges, with BP buying two, Fina one
and North Sea Group the other.

* February ICE gasoil futures were up 0.71 percent
at $995.25 a tonne by 1643 GMT.

* The ICE gasoil crack LGO-LCO1=R was trading at $16.90 a
barrel up from $16.70 a barrel around the same time on Monday.

* The February/March contracts LGO-1=R were trading in a
narrow backwardation of 50 cents a tonne, in from $1.25 a tonne
on Monday.

DIESEL ULSD10-BD-ARA

* Five diesel barges traded at premiums to February ICE
gasoil of between $16-$16.25 a tonne fob ARA, down from Monday's
premiums of $20-$22 a tonne.

* Morgan Stanley, Totsa and BP were on the buy side whilst
Vitol, Statoil and Shell were among the sellers.

JET FUEL JET-BD-ARA

* Two barges of jet fuel traded in the window at premiums to
March ICE gasoil futures of $57 a tonne fob ARA, down from
Monday's premiums of $59 a tonne.

* KLM sold both barges to Shell and Morgan Stanley.

* No cargoes traded in the window.

* "The swaps are getting hit again today and buying is
subdued with buyers holding out for lower levels," a jet fuel
broker said. There was little firm price talk, he added.

FUEL OIL

* Barges of low-sulphur fuel oil (LSFO) with 1 percent
sulphur traded up at $711 a tonne fob ARA from $704-$707 a tonne
on Monday.

* Barges of high-sulphur fuel oil (HSFO) with 3.5 percent
sulphur content were up a little at $683.75-$690 a tonne fob
ARA, from $682.25-$688.00 a tonne in the previous session.

* Fuel oil is expected to receive a boost from its use in
power stations to generate electricity as natural gas imports
from Russia have fallen during the cold spell.

* Italy has already said it will switch to oil-fired plants
to supplement its gas-fired electricity production and make up
the shortfall caused by the shortage of Russian natural gas.

(Reporting by Claire Milhench; editing by Keiron Henderson)