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China turns to U.S. for gasoline components amid European shortage

Asia has turned to the United States for supplies of gasoline blending components as tanks in Europe are running dry.

A rare cargo of mixed aromatics, also known as reformates, set sail from the U.S. East Coast last week and will head to China after topping off in Europe, according to Reuters shipping data and four traders familiar with the matter.

The vessel, Yankul Silver, is carrying about 300,000 barrels of reformate and is on its way to Amsterdam. Another vessel from the U.S. Gulf Coast was also seen hauling reformate to Asia, two traders said.

Reformates are used to upgrade gasoline produced in refineries to meet increasingly stringent government fuel requirements in China to fight pollution.

China has imported large volumes of mixed aromatics in recent weeks due to a supply shortage out of Europe, where the country usually sources this supply. Reformate exports from the U.S. East Coast are unusual as the region also typically imports from Northern Europe.

European exports of mixed aromatics to Asia rose nearly fivefold in October to over 800,000 tonnes from the previous month. However, traders said there was little product left in storage tanks in Europe now to handle upcoming demand.

An unplanned outage at a gasoline unit at Statoil’s Mongstad refinery in Norway further tightened European supplies.

Demand for reformate cargoes from the Amsterdam-Rotterdam-Antwerp region to China has slowed over the past two weeks, according to traders.

“However, demand from the Middle East is still good so Europe will get support from that due to the heavy (refinery) turnaround slate there,” said Robert Campbell, head of oil products markets at consultancy Energy Aspects.

The window to profitably sell reformate opened towards the end of the year as Chinese traders scooped up European barrels ahead of anticipated changes in import tariffs and regulations in the new year.

China planned to impose consumption taxes on oil byproducts such as mixed aromatics, light cycle oil and bitumen blend in May but no official announcement was made. Traders said they now expect changes to go into effect by early 2018.

The exports come even though U.S. East Coast gasoline stocks are near three-year lows after a brutal hurricane season and strong demand.

“Europe is sold out of mixed aromatics,” one East Coast trader said. “And the world’s pricing region for gasoline (the U.S. East Coast) is now forced to backfill the sales to China.”
Source: Reuters (Reporting by Devika Krishna Kumar in New York and Ron Bousso in London; Editing by Cynthia Osterman)

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