European diesel markets have slipped lower, with traders reporting that demand has stalled at the same time that new arrivals are weighing on the market.

FOB ARA ULSD barges were assessed at a $5/mt discount to front-month ICE LSGO futures Aug. 20, down from a $3/mt discount Aug. 19.

The premium is the lowest since June 19, when it was assessed at a $5.25/mt discount, S&P Global Platts data showed.

Paper markets have also slipped down, with the front-month versus second-month spread on ICE low sulfur gasoil futures assessed at minus $6/mt on Aug. 20, a two-month low for the spread.

The large discount for physical barges to front-month futures, combined with the wider contango on the front-month futures contract, indicates a particularly weak prompt market, sources said.

Traders have described the market as being relatively balanced in recent weeks, but increasing arrivals and plateauing demand look to be weighing on the market.

"There is not much increased supply, not much demand," one trader said.

"We see a little a bit coming from the US Gulf Coast, mostly going into Morocco and Northwest Europe, less so into the Mediterranean," the trader said, describing the market as sluggish.

Traders said that an open diesel arbitrage from the US Gulf coast to Europe would b e likely to add to length in the market.

Ultra low sulfur diesel stocks on the US Gulf Coast saw the largest regional week-on-week build during the week ended Aug. 14, rising 1.03 million barrels to 54.26 million barrels, Energy Information Administration data showed. That level was well above the five-year average of 40.60 million barrels.

Diesel and gasoil inventories at the Amsterdam-Rotterdam-Antwerp trading hub rose 3% week on week to 2.562 million mt as of Aug. 19, according to Insights Global data released late Aug. 20.

Meanwhile on the demand side, European end-user demand looked to be plateauing.

Road fuel sales in the UK edged up one percentage point to 87% of pre-lockdown levels at 15,450 liters per fuel station in the week ending Aug. 16, according to data released Aug. 20 by the UK's Department for Business, Energy and Industrial Strategy.

UK fuel demand -- which in July had been bucking a broader regional trend of a slowing recovery -- is now largely unchanged after hitting a post-crisis high of 88% of pre-lockdown levels in the first week of August.

Driving activity in most of Europe's other top economies has failed to show any improvement since early July, according to high-frequency traffic and mobility data, as a spike of new COVID cases hit seasonal tourism activity.

Road congestion levels in Madrid and Rome dropped to 82% and 75% below year-ago levels in the week to Aug. 16, according to TomTom data, taking congestion back to levels not seen since the third and first weeks of May respectively. Road congestion levels also fell to more than two-month lows in Paris and Lisbon, the data shows.

Meanwhile, average mobility indexes in Germany, the UK, France, Italy, and Spain stood at 24% below pre-crisis levels in the week, according to data reported by Google showing activity in workplaces, retail and recreational sites, and transport hubs. The data confirmed that Germany is the only major European economy to show signs of recovery with mobility at about 15% below pre-crisis levels.