Weekly product update: Asia, European gasoline cracks rise, US sink on week

Quantum Commodity Intelligence – Gasoline paper cracks rose in Asia and Europe in the week ending 2 July, but fell in the US as a stock build based on lower demand and rising net imports hit margins in the world's biggest gas-guzzling nation.

Supported by a return to Indian demand in June, which rebounded 30% on the month, Asian August paper gasoline cracks versus October cash Brent by 1630 Singapore time on Friday rose to $8.09/b from $7.42/b a week earlier, according to Quantum data.

The level is the highest in several months as demand finally catches up to higher crude prices with Singapore stocks down 5% on the week to lend support.

European gasoline cracks were steady broker data indicating European Eurobob barge paper cracks for July rising to $10.83/b from $10.71/b.

There were higher stocks in the ARA hub, which crept up to around 1 million barrels from 930,000 barrels a week earlier, according to data from Insights Global.

But while cracks rose in Asia and Europe, sluggish demand for gasoline in the US meant refining margins for RBOB fell to $20.79/b for July versus Brent, down almost $1.70/b.

The fall comes as the US announced a stock build of 1.5 million barrels in the week amid lower demand and higher net imports.

That left the RBOB-EBOB spread at $21.46/mt from $24.70/b a week earlier in a dynamic that will dampen the appetite to send gasoline across the Atlantic.

Jet

In jet fuel, refining margins weakened in both Europe and Asia as a return to air travel continues to be hit by concerns over the spread of the Delta variant of Covid-19.

July paper cracks versus frontline Brent are now at $2.50/b FOB Singapore, according to broker data, sharply down on the $3.43/b a week earlier.

With demand destruction evident for jet, August spot cracks in Singapore are hovering at their lowest levels in more than 11 weeks, depressed by stocks at the hub that fell 5% on the week.

Aviation analysts OAG said while the volume of seats added each week by airlines globally continues to climb, airlines are continuing to remove seats for later in the year.

That was borne out by Indian data that showed deliveries of jet kero remained 65% below pre-pandemic levels in June, despite diesel and gasoline consumption rising.

The bigger problem, however, remains southeast Asia,

Covid-19 cases in Indonesia continue to rise, with more than 24,000 recorded each day, a record for the country that announced some travel curbs this week.

And in Malaysia, after infections initially dipped owing to the lockdown implemented last month, they are now on the rise again.

The government has since imposed a curfew for the population and closed most factories in a bid to combat the spread of the virus.

Finally, Australia said it would halve the number of arrivals to contain what is a small outbreak currently.

And in Europe, more doubt remains over whether normal air travel will resume over the summer, with the EU at odds over whether to ban visitors from the UK over fears of what the Delta variant, which is widely spread in the UK, could do to unvaccinated populations across the English Channel.

While Spain is recording an increase in infections in younger people that is causing concern, France has also delayed removing regional restrictions as the more contagious variant of the coronavirus starts to turn into a fourth wave.

Cracks in Europe for July fell from $4.90/b a week earlier to $4.26/b on Friday basis CIF NWE by 0930 Singapore time.

That left the jet east-west at -$14/b from -$11/b on the week, opening up arbitrage opportunities due to depressed Asian demand.

Diesel/Fuel

Diesel cracks broadly fell over the course of the week, pressured by firmer crude and the prospect of a ramp up in Indian supply on the market.

Distillate stocks remain high in Singapore, but were lower in ARA.

Margins appeared immune to that data, with 10ppm paper cracks for falling to $5.25/b from $5.76 FOB Singapore and to $5.75/b from $6.32/b FOB ARA.

Fuel oil cracks were broadly stead with high sulfur cracks east and west largely flatlining over the week.