Light ends summary: European cracks ease as supply improves

Quantum Commodity Intelligence - European gasoline cracks eased this week as disruption caused by French refinery strikes eased while Asian margins caught up, and the east-west naphtha arb widened on Asian strength.

Spot refining margins for Eurobob gasoline barges in ARA tumbled by nearly $6/b by the Friday close to stand at $17.75/b, wiping out its mid-October gains as strikes ended at both Exxon's French plants France while some workers at Total stopped the industrial action.

Yet much of the easing was on the spot market as the E5 barge premium over front-month swaps fell from $156/mt last week to a three-week low of $88.67/mt on Friday, while forward cracks marginally nudged higher on the week.

November Eurobob swaps stood at $804.75/mt on Friday, up $1.5/mt on the week and with the crack up $1/b to $6/b as tightness still persists in Europe.

Independently held gasoline stocks in the ARA port hub fell around 3% in the week to 20 October, Insight Global data showed, dropping to a three-month low of around 1.2 million mt.

Inventories are now down 20% to their five-year average for this time of year.

The barge premium for E10 barges also eased, sliding from $175/mt to $140/mt, meaning its cracks was down about $3.50/b on the week to $22.20/b.

Over in the US, RBOB November futures were more or less unchanged, week-on-week, by the London close at $2.65/gal, as domestic stocks were static on the week while markets were fearing further falls.

US gasoline stocks stood at 209.4 million barrels by 14 October, EIA data showed this week, down 4% on the year and 6% below pre-Covid levels for this time of year.

Stocks were static as a 402,000-bpd uptick in demand to 8.68 million bpd, was offset by output rising to 9.74 million bpd, and net export slowed to 306,000 bpd, the data showed.

The transatlantic arb remained closed this week, traders told Quantum, as the European situation remained relatively tighter, keeping a lid on westbound flows, with just 475,000 bpd being imported by the US last week, its lowest since March.

The Asian gasoline market meanwhile picked up again, with the crack for RON92 trading back in the positive territory this week, but ending Friday at -$0.29/b, up $1/b on the week.

The spot was last assessed at $91.31/b versus $91.91/b last Friday, Quantum data showed.

Naphtha

Naphtha cargoes delivered into Europe were offered sharply lower this week, while the Asian market continued to strengthen, widening the east-west arb, which should shift more molecules east.

Cargoes CIF NWE were last assessed at $651.75/mt, down $13/mt on the week, with the spot premium over front-month swaps offered down to half on the week to $9/mt.

That meant that spot cracks were back down to -$18/b, compared to -$17/b last week.

At the same time, cargoes into Japan were bid up during the week, with the spot rising $4.50/mt to $673.50/mt CIF Japan, and the crack rising over $2/b to -$15.93/b.

That pushed the East-West basis November swaps to $21.25/mt, its highest since the start of the month.

Yet that Asian strength came despite more warning calls from the Japan Petrochemical Industry Association this week, which said a "downturn in domestic and foreign demand" will depress naphtha demand.

Japanese ethylene production tumbled 15% in September to 405,000 mt, or 13,500 mt/day, its third lowest on record, with utilisation rates of crackers at 83.2% - levels not seen since before the pandemic.