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Thursday, October 19, 2017

Weak US Imports Push European Gasoline East

June 29, 2017

  • © Evren Kalinbacak / Adobe Stock
  • Source: EIA
  • © Evren Kalinbacak / Adobe Stock © Evren Kalinbacak / Adobe Stock
  • Source: EIA Source: EIA

Unusually bloated gasoline inventories in the U.S. during peak summer driving season has kept the transatlantic arb barely workable. EIA data indicates that gasoline imports into the U.S. East Coast (PADD 1) for June averaged 549 kb/d so far, down by 15.4 percent m-o-m. As such, an atypical influx of LR tankers carrying gasoline from Europe have been fixed to the East in recent weeks. At least 6 LR2 and LR1 tankers loaded with gasoline are heading from the ARA region to AG/Singapore in June.

 
Record high refinery runs and lackluster domestic demand have contributed to swollen gasoline stocks in the U.S. which stood at 240.9 mmb for the week ending Jun 23, around 9 percent higher than the five-year average. The gasoline surplus is prevalent on the East Coast which is heavily reliant on imports from Europe and Canada. Gasoline inventories on the Atlantic Coast came in at 68.2 mmb for the week ending Jun 23, 10 percent above the five-year average. As reported by Reuters, the Colonial Pipeline recently announced that demand to move gasoline from the Gulf Coast to the Atlantic Coast was at a six-year low.
 
In contrast, onshore light distillate stocks in Singapore are at their lowest (10.5 mmb) in more than 8 months for the week ending Jun 21 due to a seasonal uptick in gasoline exports to Indonesia during Ramadan. Onshore light distillate inventories are also around 20 percent lower than that of a year ago when the Asian market was heavily oversupplied. We expect Asia to remain an outlet for European gasoline in the short run, should inventories remain bloated in the U.S.


The Author
Rachel Yew is a Singapore based commodity and freight research analyst at Ocean Freight Exchange.
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