Gasoline in floating storage builds in Europe

Gasoline being held in floating storage offshore northwest Europe is following inland stocks higher, adding pressure to a well-supplied market.

Approximately 320,000t of gasoline is currently being held in tankers offshore northwest Europe, according to the latest Vortexa data, up from around 290,000t a week ago and under 50,000t at the start of November.

Floating storage — defined by Vortexa as product held in stationary or almost stationary tankers for at least seven days — was largely drawn down at the end of the summer, coinciding with the switch to winter-grade gasoline on 1 October. But a shift to a contango market structure in the middle of November, combined with the return of stricter Covid-19 travel restrictions across large parts of Europe, have led to a steady build in inventories.

Italy introduced tighter restrictions at the start of December, while Germany and the Netherlands, as well as London and several neighbouring counties in southern England, have stepped up lockdown measures this week. Latest European road fuel data point to a sharp decline in gasoline demand last month, with consumption in Italy falling by 27.5pc on the year and demand in France hitting the lowest level since the peak of the first wave of the pandemic in April.

Deteriorating demand has slashed refining margins, with the Eurobob oxy gasoline price slipping to a discount to North Sea Dated crude on 2 December for the first time since August. The benchmark European gasoline price has averaged a 46¢/bl premium to North Sea Dated so far in December, which is even lower than the April-May average of 60-65¢/bl during the first coronavirus wave in Europe.

Gasoline producers are increasingly turning to storage to place excess supply. Independently-held gasoline stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region reached at a 10-week high of around 1.37mn t this week, up by 12pc on the previous week and around 70pc higher than the same time last year.

Argus understands that most of the gasoline going into tank is finished summer-grade product, or components for summer-grade, ready for the next seasonal transition in April. Prices of summer blending components are relatively low due to the lack of any material blending demand in northwest Europe, while higher specification finished summer-grade gasoline can still be exported to more lucrative markets when the arbitrage makes sense. There is also likely to be summer-grade gasoline left over from last year in inland storage. A flood of summer-grade gasoline hitting the market in the spring could dampen the impact of any demand recovery.

By George King Cassell

Gasoline storage in northwest Europe ('000t)