Brazilian gasoline at record premium to Nymex RBOB

Narrower discounts for light naphtha and C5 diluents to Nymex RBOB led Brazilian gasoline differentials to the benchmark to shift to premiums last week for the first time in two years.

The Argus index for full gasoline cargoes into Brazil climbed to premiums of 3-4¢/USG to May Nymex RBOB in the week ending 20 March, up by 8¢/USG from the previous week. It was the highest level since Argus started assessing the grade in January 2018.

Brazilian gasoline premiums grew alongside a highly volatile oil derivatives market, which saw [US gasoline prices to fall to record levels below WTI oil prices on 23-24 March](https://direct.argusmedia.com/newsandanalysis/article/2090210).

Gasoline import cargoesinto Brazil are typically priced at discounts to Nymex futures contracts. The discount reflects the quality differential between Brazilian and US fuel specifications, Renewable Volume Obligation (RVO) costs and freight costs between the world's largest refining hubs and Brazil.

Gulf coast gasoline margins fell to $4.92/bl against WTI on 23 March, marking the deepest negative margin since Argus began assessing WTI prices at Houston starting August 2018. The fall followed a collapse in demand for gasoline in the US market amid shelter-in-place orders and other measures to curtail the spread of the coronavirus. The drop extended to the RBOB gasoline futures contract, which is used as a benchmark to negotiate physical cargoes of gasoline delivered to Brazil.

Naphtha differentials to Nymex RBOB rose from -57.8¢/USG to Nymex RBOB May to -22.8¢/USG this month as residual demand in the petrochemical sector buoyed the feedstock.

Healthy demand for heavy crude diluents also widened natural gasoline's spread to RBOB futures. Values rose 30¢/USG to Nymex RBOB May -24.8¢/USG between 2-20 March. Both naphtha and natural gasoline are common blending components used to produce Brazilian gasoline.

The rise in the differentials for imported gasoline cargoes comes as the drop in global gasoline prices outpaced falling Brazilian domestic prices. The average price of gasoline sold by Petrobras fell by 30pc between 2 March and 20 March, to 101¢/USG. The Argus index for imported gasoline fell by 50pc over the same period, to 65.8¢/USG on a dap Brazil basis. This improved import arbitrage economics, prompting companies selling imported gasoline stored in the port of Paranagua to offer discounts of up to R200/m³ (15.6¢/USG) below wholesale prices at the Araucaria refinery in the week ending 13 March.

By Amance Boutin