Weekly light ends wrap: Gasoline cracks climb in Europe, soar in Asia on US draw

22 Oct 2021

Quantum Commodity Intelligence - European gasoline cracks fell at the start of the week, but then climbed after the Energy Information Administration report Wednesday revealed US gasoline stocks dropped a hefty 5.4 million barrels.

Deliveries of gasoline implied demand also rose to levels last seen in the driving season.

Before the EIA report, cracks for Eurobob E5 gasoline barges in ARA fell to around $12/b on Tuesday, down from $13.60/b last Friday.

But cracks for gasoline barges, the benchmark grade in Europe, climbed back above $13/b by Thursday.

There has also been a healthy draw of barrels from Europe to West Africa, sources said.

The market is still expecting gasoline demand and cracks to tumble amid the seasonal downturn over the winter, but the timing continues to be pushed back.

At the end of September, cracks for November Eurobob E5 paper were hovering around $5.50/b.

But the strength of demand for spot barrels in October has rallied the November paper crack, and it was pegged at $10.38/b Thursday at 1630 UK time, down just $0.20/b from last Friday.


Over in Asia, cracks soared from $12.71/b a week ago to $15.09/b on Friday, as flat prices approached and then backed away from a costly $100/b.

Over the past few months, regional gasoline demand has been hampered by travel restrictions in southeast Asia as governments try to shield their unvaccinated population from the Delta variant of Covid-19.

But with restrictions easing in Indonesia, Malaysia, Singapore, China, Vietnam and Thailand, and Indian demand surging to above pre-pandemic levels, gasoline cracks have soared.

That has left backwardation in the gasoline market very steep, with the Nov/Dec spread at $2.75/mt, up from just $1.95/b a week earlier.

That being said, mobility in some Chinese cities has collapsed over the past week, as the country employs its zero-tolerance Covid policy to eradicate a handful of infections.

According to search engine Baidu, several cities in Gansu and Inner Mongolia, home to some 50 million people, have seen mobility retreat more than 50%.


Naphtha cracks in Europe strengthened over the week amid low stocks, partly on the back of the recovery in gasoline strength mid-week, as well as high propane prices, but the main driver of the market came from petrochemical demand in Asia.

There is a shortage of available product in Europe that has helped push up spot cracks this week, and also this month, caused by the early spike in propane prices over the summer, causing crackers to switch feedstocks to naphtha.

Cracks for spot naphtha cargoes in northwest Europe were pegged at $3.50/b Thursday, up from $3.21/b last Friday and up from a month low of $1/b in early October.

This left European naphtha cracks almost at parity with Japan, where CIF cargo spot cracks were pegged at $3.40/b versus Brent on Thursday.

But as crack values stay strong through the next few months in Japan, where petchem output approaches pre-pandemic levels, values retreat in Europe.

Asian cracks are above $3/b in November and December and around $3.50/b in January.

In contrast, the paper cracks in Europe are much lower, with November at $2.20/b, December at $1.75/b and January at $1.37/b on Thursday.

The east-west for November remains flat at around $11/mt.


Propane prices and cracks versus Brent dropped sharply this week after the Energy Information Administration report revealed a build in US propane stocks after two previous successive draws.

Cracks for European propane cargoes were pegged at -$17.32/b Thursday, down from -$16.73/b last Friday.

But stocks remain low in the US, which is long propane and exports to Europe.

Despite naphtha strength, November propane paper was still pegged $68/mt above naphtha paper on Thursday.

Although that was down from a spread of $85/b last Friday, the spread was up from an average of around $55/mt last month.