Light ends summary: Asian gasoline cracks slump to yearly lows on demand slowdown

Quantum Commodity Intelligence – The spectacular collapse in gasoline outright prices and cracks continued unabated this week, as recessionary fears and demand destruction saw prices slump to fresh multi-month lows.

Benchmark FOB Singapore 92 Ron gasoline prices were assessed 15 July at $106.60/b, almost $14/b down from last Friday's $120.43/b, whereas Sep22 Brent over the same period dropped by around $7/b on the week.

Gasoline cracks in Asia slumped for the third consecutive week, dropping below $10/b for the first time in 2023. The 92 Ron physical crack was assessed at $9.67/b down a massive $30/b from the record high of almost $40/b on 24 June.

The falloff in the front-line swaps crack has been slightly less dramatic, but has still dropped from the 24 June record of $35/b to $10.36/b by Friday, including a $5.15/b fall over the past week.

The road transport fuel was further undermined this week after US data from the EIA showed deliveries had fallen more than expected in the week to July 8.

Also of note, the spread between diesel and gasoline prices in Asia ballooned to an all-time this week on a global distillate shortage combined with a surprise miss in US gasoline demand figures.

Quantum data showed Thursday that the spread between spot cargoes of 10ppm diesel and 92 RON gasoline was up another $3.30/mt on Thursday, hitting a record high of $151.70/mt.

In Europe, lower Rhine levels were also said to be leading to a build-up of stocks in the ARA region, which was also weighing on prices as barges have to lighten loads to take molecules to Germany from the blending hub.

Physical E5 Eurobob prices were down around $120/mt on the week to $1072/mt by the Friday London close, leaving the physical crack versus Brent at just over $29/b, down $8/b on the week, having slumped from the record high of $64.30/b at the start of June.

Analytics firm Vortexa noted that record high gasoline cracks earlier in the summer had pushed global refiners' gasoline production to a multi-year high, which has seen seaborne liftings/loadings reaching seasonal highs for three consecutive months since May.

"As we move away from peak gasoline season in the Atlantic Basin and witness demand destruction in the East of Suez markets, we see global gasoline cracks fall from recent historical highs," said Vortexa, noting refiners will likely start maximizing middle distillate production as European countries look for alternative diesel sources ahead of further Russian sanctions.

Weekly data from Insights Global Friday revealed a 10.3% build in gasoline stocks at the northwest European ARA storage hub, with 1.246 million mt listed as being available.

Naphtha

Naphtha prices in Asia were also in retreat, with benchmark CFR Japan assessed at $752.25/mt Friday, compare to week-ago levels of $818/mt. Similarly, the M1 swap was down around $70/mt over the week to stand at $732/mt Friday.

In terms of cracks against Brent, the physical crack was was -$12.41/b, around $1/b lower on the week.

European naphtha prices also came under pressure, with CIF NWE dropping from $814/mt last week to settle at $746.75mt Friday

Over the same period the physical NWE crack against Brent eased from -$14.32/b last Friday to close the week at -$15.73/b.

Global demand for naphtha has been sluggish this year on the back of a squeeze in petrochemical margins as crude oil values soared, with while competitor feedstock LPG has enjoyed a price advantage, although naphtha has seen some demand uptick in July.