European refiners cut gasoline production 5.7%, distillates 3.1%

London (Quantum Commodity Intelligence) - European refiners slashed production of gasoline, naphtha and middle distillates in May as domestic refining margins failed to improve and global run rates increased, according to sources Monday, quoting data from Euroilstock.

Gasoline production shrank 5.7%, or 120,000 mt, to 1.994 million mt in May from 2.114 million mt in April, the data, which covers 16 European countries, shows.

Middle distillate production slumped 3.1%, dropping to 4.447 million mt in May from 4.588 million mt in April, a fall of 141,000 mt.

Naphtha production saw the sharpest percentage fall, dropping 8.5% to 839,000 mt in May from 909,000 mt in April, a fall of 77,000 mt.

Fuel oil production also fell 2.5%, dropping to 866,000 mt in May from 888,000 mt in April, a fall of 22,000 mt.

Refinery crude intake fell 4.3%, dropping to 8.527 million mt in May from 8.913 million mt in April, a fall of 386,000 mt.

After a brief respite due to the Colonial pipeline shutdown in early May, which pushed cracks for premium unleaded gasoline barges in ARA to a high of $11.3/b versus Brent, the refining margin drifted lower to finish the month at just over $10/b.

Gasoline cracks have softened further in June, weighed lower by the cranking up of US refining rates, which has resulted in consistent product builds in the US despite the start of the driving season.

Export of gasoline from Europe to the US fell to a three-month low of 1.2 million mt in May, according to data from Vortexa.

Overall, around 4.6 million mt was exported from Europe in May, just a fraction more than the 4.5 million mt in April, the ship-tracking company found.

US Gulf Coast refiners have increased exports to Latin America in June, squeezing out European barrels.

Meanwhile, the diesel market in Europe has come under pressure from the ramp-up of production east of Suez, sources told Quantum.

Cracks for ultra-low sulfur diesel barges gained more than $1/b over May to end the month at $6.3/b.

But the refining margin measure has retreated by around $0.50/b in June so far.

Diesel barge trade in ARA has been very thin, and premiums for diesel cargoes above Low Sulfur Gasoil futures in north Europe and the Mediterranean have fallen to low single digits.

"It (diesel) started to look brighter in May, but then we were hit by barrels from east of Suez and then also some from the US Gulf," said one source.  

The Euroilstock data was comprised of data from 16 countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK and Norway.