Eurobob gasoline diffs tumble as transatlantic arb closes
Quantum Commodity Intelligence - Barge differentials over the front-month swaps in Eurobob gasoline markets tumbled this week after the transatlantic arb closed amid a sell-off in RBOB futures, while gasoline blending remained challenging amid an octane shortage.
The differential for E5 oxy barges traded in ARA over July swaps started Monday morning at $160/mt and sank to $75/mt by Wednesday morning, while the diff of E10 non-oxy barges halved from $150/mt to $75/mt.
At the same time, the underlying July Eurobob swap fell nearly $50/mt over the same time to $1,315.50/mt, depressing gasoline refiner margins.
"The market was too inflated, too ridiculous and a bit crazy. The closing arbitrage to the US meant buyers weren't pushing up as much this week. There's also been a bit more pressure on the offer side," a gasoline broker told Quantum.
"However, the market is now stabilizing, and volumes are gradually improving," the broker added.
After touching its highest settle on record at $4.2522/gallon last Friday, US RBOB gasoline futures have fallen over 2% over the past three sessions as traders booked profits, despite rising US fuel demand and falling inventories.
The transatlantic arbitrage between the US RBOB futures and Eurobob swaps slumped to $8/mt at the start of June, making export economics more challenging, and after reaching levels of $25/mt in early May, which spurred a rush in westbound gasoline flows.
The transatlantic arbitrage stood at $15.50/mt on Wednesday morning, with sources adding that the European market will need to correct more before export flows restart.
Eurobob cracks have tumbled so far this month, with the July margin down to $39.75/b by Wednesday morning after reaching a record high of $45/b at the start of this week.
