Europe oil/products: Gasoline cracks jump higher amid crashing Brent

15 Jul 2021

Quantum Commodity Intelligence - Brent prices recovered from intraday lows in the afternoon but were still sharply lower than Wednesday to generally depress European oil product prices, although gasoline cracks jumped higher and propane flat prices bucked the trend to edge higher.

September Brent was down $1.44/b at $74.44/b by the late afternoon marker at 1630 London time (1530 GMT), but propane, naphtha and gasoline barrel prices were down by far less.

US gasoline stocks built 1 million barrels last week, but the market had one eye on US refiners potentially needing to reduce refinery runs further in the wake of the very large total US product build last week of 10.4 million barrels.

Deliveries of finished motor gasoline, a proxy for implied demand, slumped to 9.28 million bpd, down from an all-time high of 10 million bpd on the week to July 2 and before the Independence Day holiday boost on July 4.

But last week's US gasoline demand was still higher than the 9.17 million bpd over the week to June 25.

The US loss in refining margin looks to be a gain for light ends cracks in in Europe amid very low stock levels in ARA.

Products 

Naphtha cracks rallied again, with cargo prices dropping only $9/mt ($1.01/b), and the backwardation between August and September paper widened again to $10.50/mt, back to where it started the week.

Naphtha stocks dropped 46,000 barrels this week in ARA to just 169,000 barrels, according to Insights Global. On June 10, the stocks stood at 271,000 barrels.

The spread above propane narrowed amid the latter's strength. Propane cargo prices gained $0.75/mt to $630.75/mt to leave barrel prices steady at $49.66/b. US propane stocks gained 1.6 million barrels last week and could be building too slowly for October when they usually peak ahead of winter.

Gasoline prices dropped but cracks rallied and backwardation widened sharply, with Eurobob E5 barges trading between $7/mt and $10/mt above August paper, and E10 trading at $9-$10/mt above the front-month swap.

Premium unleaded gasoline traded at $726/mt, down $11.50.mt ($1.38/b) from Wednesday, while E10 was assessed down $11.50/mt ($1.05/b) and E5 was assessed down $6.75/mt ($0.81/b).

Gasoline stocks in ARA dropped another 102,000 barrels, said Insights Global, and are very low compared to 2019.

Jet traded at the highest differentials over LSGO this year. An end of July arriving cargo traded into Le Havre at $27/mt above August LSGO, but there was still an offer into Rotterdam at $25/mt above August LSGO for early-August arrival. Jet barges were offered at August plus $25/mt.

Diesel barges traded at $1.50/mt below August LSGO and cracks were steady as Low Sulfur Gasoil futures followed crude lower after Wednesday's large distillate stock build in the US. Diesel cargoes were bid and offered at $3.25 versus $3.75/mt against August LSGO into Amsterdam.

The spread between high sulfur fuel oil and marine fuel narrowed sharply, with the HSFO down $7.25/mt, and the marine 0.5% down $12/mt.

Meanwhile, barge traffic on the upper Rhine beyond Speyer in Germany has stopped and the stoppage could be extended as far down the river as Dusseldorf on Friday because of high water levels, brokers warned.

There could also be disruption to traffic in the Netherlands with a chance the Limmel lock on the river Mass could be closed.

“It is uncertain how long the barge traffic will stand still, for tomorrow further heavy rainfall is forecast over the Rhine basin,” said the brokers Riverlake.

Depth levels in Cologne in Germany will rise from 6.24 metres Thursday to around 8.3 metres on Sunday, Riverlake noted, amalgamating the forecast of three agencies.