Light end summary: Gasoline holds on to gains on thin supply
Quantum Commodity Intelligence - Gasoline rebounded after last week's sharp sell-off as prompt supply concerns persist, while naphtha and LPG remain wedded in negative territory on Europe's petrochemical sector malaise.
Notional refining margins on Eurobob oxy gasoline were just shy of $20/b above ICE Brent by Friday, up around $4/b from the end of last week.
Cracks have averaged around $18.50/b this month, 30% higher than October last year.
And while margins are unlikely to again test three-month highs near $30/b reached in the middle of the month, tight European supply is providing a floor.
Eurobob barge liquidity – especially on the benchmark E5 oxy grade – is still struggling with a lack of available oil.
Strikes remain in place at Total's 240,000 bpd Gonfreville refinery and its depot at Feyzin, and it will still be a week or two before France's other refineries – including two ExxonMobil sites – are back to full working order.
On the other hand, output has resumed fully at Shell's 400,000 bpd Pernis refinery – Europe's largest – and there is no doubt some of the acute supply difficulties that characterised European product markets earlier this month have eased.
Independently-held gasoline rebounded by 1% from last week's three-month lows to just over 1.2 million tonnes in the ARA region this week, according to Insights Global data.
Export demand has been mixed amid tight economics on the transatlantic route.
Traders told Quantum this week that eurograde cargoes are making their way to the US again this week after European prices corrected lower, but demand is a long way from the peak at the start of the month.
The RBOB-EBOB spread dropped to around $0.16/gal in the last few days, from nearly $0.19/gal a week ago – but needs to be around $0.20/gal to make the route workable on current freight and blending costs.
Tight US supply should keep European values from falling too low.
US gasoline stocks fell to their lowest level since 2014 during the third week of October, according to the EIA's latest data, as implied demand rose for a second straight week.
The draw was particularly heavy on the US Atlantic coast – where most European exports end up – which fell 3.1 million barrels on the week.
Naphtha is still heading mainly into the gasoline pool, amid lacklustre petrochemical demand.
Naphtha inventories fell 16% to a three-week low 287,000 tonnes in the ARA week, broadly in line with their seasonal average.
Petrochemical demand remains subdued in both Europe and Asia, as laid bare by quarterly earnings this week.
ExxonMobil said in its earning release Friday that global chemical margins were below the bottom of its 10-year range, "reflecting weakening global demand."
Naphtha cracks were heading back towards $20/b below crude on Friday, down around $2/b on the week.
Sluggish petchem demand has also weighed on LPG as a feedstock, and propane is yet to see any boost from heating demand amid mild weather in Europe.
Propane cracks were touching minus $50/b to ICE Brent again by the end of this week, down around $2/b from seven days ago.
