Eurobob oxy gasoline barges are at their narrowest premium to front-month Ice Brent crude futures since February 2021, laid low by poor export demand throughout summer and consequent high stock levels in northwest Europe.
Oxy barges were at a $2.39/bl premium to the front-month Ice November Brent contract at 16:30 BST on 1 September, the narrowest since a $1.69/bl premium on 12 February last year.
Gasoline crack spreads have been falling steadily since hitting an all-time high of $62.70/bl at the start of June. The oxy barge margin to crude futures was $13.98/bl in August, narrower for a second consecutive month and only just above the $13.87/bl of August 2021. Gasoline margins have not dipped below their year-ago level since February 2021.
A lack of export opportunities has weighed on European gasoline throughout the summer. A steep backwardation structure and high freight rates, as well as poor US demand during the peak summer driving season, have hampered economics for the transatlantic arbitrage throughout summer. Exports of European gasoline to the US were 1.07mn t/month in the June-August period, according to Vortexa data, down from 1.53mn t in the same three months of 2021.
Some traders have said the arbitrage has recently opened for winter-specification grades ahead of the seasonal transition, but a winter demand lull could create a ceiling for any uplift in flows.
Exports to west Africa — another main demand centre for Europe's gasoline — faltered in August, falling to around 1.39mn t from 1.62mn t in July and 1.53mn t in August 2021. European exporters have faced stiff competition from suppliers in the Mideast Gulf, where the arrival of likely-discounted Russian gasoline is freeing up locally-produced supply for export. Overall gasoline exports from the Mideast Gulf hit a near two-year high of 1.14mn t in August, which included a five-month high of 251,000t heading to west Africa.
Weak export demand has caused inventories to swell in northwest Europe. Independently-held gasoline stocks in the Amsterdam-Rotterdam-Antwerp (ARA) hub hit 1.53mn t in the week to 24 August, their highest since Argus began collecting the data from consultancy Insights Global in 2011. Stocks then fell by 14pc in the week to 31 August, but remained 27pc above the five-year average for that week.
Gasoline supplies could have been bolstered in Europe by exceptionally low naphtha prices. A slump in demand from Asia-Pacific's key petrochemical sector has caused a supply glut, and with naphtha crack spreads hitting all-time lows in June and supplies unable to clear out of Europe, more naphtha could be finding its way into the gasoline blending pool, adding to supplies.
Market participants said European refiners chasing extremely-high diesel margins could also be adding to gasoline output, further tipping supply-demand balances.
