A change in US fuel specifications that sets a new Rbob gasoline standard from 1 January will alter the summer gasoline blending pool in northwest Europe, increasing demand for components such as reformate and naphtha at the expense of others.
The US Environmental Protection Agency (EPA)'s Fuels Regulatory Streamlining rule reduces testing requirements for reformulated gasoline by requiring summer fuel to meet a Reid Vapour Pressure (RVP) of 7.4psi, compared with 7.8psi previously, and does away with winter RVP specifications altogether. It limits benzene and sulphur, and replaces the decades-old Volatile Organic Compound performance standard to measure emissions.
Importantly for the European gasoline blending pool, aromatics are no longer restricted. European gasoline cargoes that go into the US market typically specify 35pc aromatics. This means octane boosters with low aromatic qualities — such as alkylate and isomerate — will no longer command such a hefty premium. The natural winner is reformate — a rich octane booster that is also high in aromatics. Reformate also has a low RVP rating, so is the perfect blend component for the new reformulated gasoline grade.
Naphtha stands to benefit as it is not only a feedstock for reformate itself via a reformer, but can go directly into gasoline blends. Naphtha has a relatively high RVP so its use is generally limited, especially in summer grades. It also needs additional octane boosters to meet specification. But it is relatively cheap and freely available — until this year at least — and usually trades at a discount to unfinished gasoline, unlike most of the octane-boosting blend components. The sharp reduction in refinery operating rates as a result of the Covid-19 pandemic kept naphtha supply relatively tight this year, trading quite often at a small premium to Eurobob oxy gasoline. So the new Rbob spec change could add support to naphtha prices in northwest Europe, even when supply comes back on line, and could even tighten gasoline supply if blending costs in northwest Europe become too restrictive.
Increased flexibility for blending Rbob comes at a time when the Atlantic coast is more reliant on imports than ever, after the PES 330,000 b/d Philadelphia refinery was shut after a fire in June 2019. It should open the region to more imports, and make blending cheaper for domestic blenders. But European gasoline producers may not be the only winners. Competition in the Atlantic basin could increase on finished grades and blending components. It could see new entrants altogether, such as Russian A92 gasoline — which has aromatic content at 40pc and could find a market in the US.
