US Gulf coast draws rare gasoline import rise

An excess of gasoline blending components in Europe and a string of gasoline-unit outages in the US Gulf coast prompted a rare increase in gasoline imports into the US Gulf coast this month, one of the world's largest refining hubs.

US Gulf coast gasoline imports rose to 221,000 b/d during the week ended 23 April, the highest level since July 2019, according to the US Energy Information Administration (EIA). Waterborne gasoline imports into the US reached 150,000 b/d so far this month, the highest level in at least three years, Vortexa data show. Europe accounted for around 80pc of April arrivals so far, or 120,000 b/d. All of these cargoes offloaded at Texas ports.

Imports rose during a period of particularly heavy fluid catalytic cracker (FCC) outages. Phillips 66's 250,000 b/d Alliance refinery in Belle Chasse, Louisiana, Marathon Petroleum's 565,000 b/d Garyville, Louisiana, facility and 585,000 b/d Galveston Bay refinery in Texas, as well as ExxonMobil's 500,000 b/d Baton Rouge, Louisiana, refinery are among refiners confirmed or heard to have had FCC outages this month. The outages have depressed prices for vacuum gasoil (VGO), the main FCC feedstock.

At least 860,000 bl of April arrivals so far appear to be reformate, a high-octane blendstock that has gained popularity following the US Environmental Protection Agency's (EPA) removal of aromatic testing requirements this year. Reformate, a high-aromatic blending component for gasoline, has also increased blender demand for naphtha, a sub-octane blendstock typically used to complement reformate.

More reformate is expected to arrive in the US Gulf coast in May from overseas. Some of this material has already been sold, indicating strong demand in a market where importers typically seek buyers upon arrival of the cargo.

Gasoline components — such as reformate and alkylate — are not subject to US renewable fuel blending requirements upon arrival, unlike finished gasoline, RBOB or CBOB. The cost of compliance, measured by the renewable volume obligation (RVO), rose to a new record high of 18.16¢/USG, or $7.63/bl yesterday.

The RVO can significantly narrow the arbitrage to bring finished grades into the US, which puts components like reformate at an advantage. Uncertainty over the volume of overdue and future blending requirements and pending court cases, including at the US Supreme Court, has sent the RVO to record levels. Those higher levels are likely to persist at least through June, if not longer.

European excess

Higher US inventories and deteriorating transatlantic arbitrage economics has slowed European exports, resulting in a surplus of blending components and finished-grade gasoline in northwest Europe. Around 330,000 b/d of gasoline and components has departed Europe for the US Atlantic coast so far this month, down from 390,000 b/d in March, according to Vortexa.

The availability of finished-grade gasoline in northwest Europe has pushed down cargo premiums to multi-month lows, which in turn has weighed heavily on regional blending demand. Liquidity in the ARA Eurobob oxy gasoline barge market — the refining hub for northwest Europe — has slipped below 5,000 t/d in the last two weeks, roughly half the March total. Total traded volumes for April are likely to be their lowest since last November. Regional stocks of reformate in particular are starting to build as a result of lower blending, with offers currently outweighing bids by some distance in the spot market.

But European suppliers are still preferring to send components transatlantic. The largest cargo to arrive in the US Gulf coast in April is the Ayse C, a long-range 2 (LR2) vessel carrying around 820,000 bl of gasoline and blending components. The cargo loaded in February from Rotterdam, the Netherlands, and was diverted to Houston in early April from original destinations in Spain, Vortexa tracking data show. US gasoline demand continues to outpace Europe, with implied demand within 4pc of pre-pandemic levels for this time of year, according to yesterday's EIA data. Many European countries still have in place — or have extended again — travel and economic restrictions this month to combat a third wave of infections.

By Chunzi Xu and George King Cassell