Saras sees higher diesel prices next summer

LONDON (Reuters) - European ultra-low sulphur diesel price values look set to jump next summer as the market prepares for tighter environmental fuel specifications from 2009, Italian oil refiner Saras (SRS.MI: Quote, Profile, Research, Stock Buzz) said on Wednesday.

At the same time, the increasingly tight fuel quality rules will add to the complexity of refining operations, exacerbating the impact of any plant outage.

European Union rules taking effect in January 2009 will cut the maximum sulphur content in gasoline and diesel to 10 parts per million, from 50 ppm now.

The move would come four years after the switch to 50ppm diesel from 350ppm in January 2005.

"That means refineries will start producing this (10ppm) at a global level during the summer of next year," Saras General Manager Dario Scaffardi told the Reuters Global Energy Summit.

"So I expect a significant increase in price sometime during next summer, very similar to what happened in 2005 with 50ppm."

European cargo price premiums for 50ppm diesel surged almost fourfold between July and November 2004 ahead of that specification change, peaking at around $98 a tonne over front month ICE gas oil.

Diesel cargo price premiums have averaged around $30 a tonne so far this year.

While some countries, such as Germany, Finland and Austria have already made the switch to 10ppm diesel, diesel-run vehicles in many countries in southern Europe continue to mostly use fuel with 50ppm sulphur content.  Continued...