Light end summary: Gasoline, naphtha rebound on winter blending, exports

Quantum Commodity Intelligence – Light ends recovered this week as blending demand ticked up on the seasonal switch to winter gasoline, which also briefly opened the transatlantic export route.

Eurobob oxy gasoline recovered from last week's near-two-year low of $2.43/b to a high of $8.45/b on 7 September, and ended the week largely flat at a $6.07/bl premium.

Northwest European naphtha cargoes hit a one-month high $20.27/b discount to crude on 8 September, closing the week also largely flat at -$21.22/b.

The seasonal switch to winter gasoline this month has seen a recovery in blending demand and drawn in more naphtha as a primary component.

Winter-grade gasoline typically has less naphtha than summer grades, switching instead to cheaper butane, but blenders have increased overall demand for the new grade.

Regional naphtha stocks were drawn down as a result, ARA inventories down 16% to a 13-week low of around 330,000mt by 8 September.

Gasoline stocks swelled as blenders built up supplies, up by 2.4% this week to 1.35 million tonnes.

TA arb reopens

The seasonal switch helped push the gasoline transatlantic (TA) window briefly open when underlying paper markets shifted to October at the start of this month.

From single-digits at the end of August, RBOB's premium to Eurobob swaps reached a six-week high $0.17/gal on 5 September, before easing to $0.15/gal at Friday's close.

But it was open long enough to see an uptick in TA demand.

EIA data for the week to 2 September showed gasoline imports above 1 million bpd for the first time since June, with 936,000 bpd arriving in the US Atlantic coast alone.  

But a quiet hurricane season and a subdued end to the summer driving season, marked traditionally by the Labor Day weekend just gone, has kept any upside to a minimum.

US gasoline demand ticked up by 1.6% to a three-week high of 8.7 million bpd in the last week of August, but remains 7% below its five-year average for the time of year.

Heading in a different direction, gasoline flows to west Africa have been heard higher.

Cheap European gasoline has helped exporters, especially with cracks falling to single digits.

The region's biggest consumer – Nigeria – pays for its gasoline under a crude-for-swaps programme, so usually steps up purchases when product cracks fall.

European exporters have had to compete with excess gasoline volumes east of Suez for the lucrative west African market this summer.

With more Russian cargoes heading east, surpluses have built up in the Middle East gulf that have threatened Europe's usual export markets.

Around 200,000mt of seaborne gasoline reportedly left the Middle East for west Africa in August, the most since March.  

Volumes on the route rarely topped 100,000 tonnes/month before this year.

Propane

Propane cracks continue to trend higher on seasonal demand, cracks at a five-month high $38.89/b discount to ICE Brent on 8 September.

But upside is limited by weak petrochemical demand, and a correction in European natural gas prices this week as discussions continue over a price cap.

Butane has been heard changing hands in northwest Europe at parity to naphtha, firming recently on the back of winter gasoline blending demand.