US Atlantic Coast buying interest for seaborne gasoline has boosted exports from Northwest Europe and the Mediterranean and invigorated European refining margins, though sharp spikes in trans-Atlantic freight indications for Medium Range tankers has raised questions on workable arbitrage economics.
S&P Global Platts analysis showed March 15 that the Gulf Coast refinery complex was expected to continue operating at a reduced capacity, of around 74%, amid the ongoing impacts of the February deep freeze that disrupted operations in the region. In the week to March 12, the USAC imported 3.55 million barrels of gasoline from Northwest Europe, the highest weekly volume since August 2019, US Energy Information Administration data showed.
Lower supplies along the Colonial Pipeline, which delivers gasoline from the Gulf Coast to the Atlantic Coast, have seen buyers turn to surplus European gasoline to meet demand. The bullish European exports have helped improve gasoline's relationship to crude oil. The Northwest European front-month gasoline crack spread was assessed at $10.45/b on March 15, the third consecutive day it has been above the $10/b level, which has not happened since July 2019.
Sources said that trans-Atlantic arbitrage was also open from the Mediterranean gasoline market, which had cleared any remaining length in non-oxygenated gasoline volumes, particularly of winter specification gasoline.
MR spikes slow cargo inquiry
Buying interest for European gasoline could, however, falter as the recent unexpected increase in cargo inquiries caused freight rates to surge March 12-15, though charterers are managing to wrestle down indications to a degree.
Freight indications for UK Continent-US Atlantic Coast shipments, basis 37,000 mt, jumped to $22.44/mt on March 15 from $15.18/mt on March 11 as increased spot inquiry helped drive shipowner sentiment. Since then, however, sentiment has cooled as charterers stopped entertaining owner ideas at these levels.
Despite this, market participants were well aware that USAC requirements were growing as regional production rates had not compensated the shortfall in gasoline inventories, and it remains to be seen how markets will deal with incoming ballasters from the USAC.
"There are many factors at play to suggest the cargoes will keep coming – big draws are expected from the states, the summer switch of gasoline grades and restrictions easing in the USAC will make it a busy time ahead," a shipowner said.
