Surplus Asian gasoline finds homes in the Americas
A supply glut in the Asian gasoline market has prompted market participants to look further afield to clear the length, with Mexico and the US West Coast as main arbitrage destinations, trade sources said this week.
To date, up to 175,000 mt, in five MR vessels, were scheduled to load in July from Singapore and Northeast Asia to Mexico and the USWC.
Another two to three MR-sized cargoes were also set to move from Singapore and South Korea to west coast Mexico.
Mexican state-owned Pemex’s marketing arm PMI is now seeking two MR vessels: one for July 26-27 loading from Singapore, and another for loading over July 26-27 from South Korea.
In comparison, four to five MR cargoes, totaling 140,000-175,000 mt, have loaded in June from Asia to the Americas.
“The arbitrage cargoes are moving and it is the only way to secure [profit] margins. In Asia the market is very bad now — there are barrels coming out from every refinery,” a Northeast Asian refiner said.
While Indonesia’s Pertamina remains the key buyer of gasoline in the region, there have been few spot barrels sought from other market participants to absorb the surplus, sources said.
“Regional demand is quite slow, and across the globe the East is still the cheapest so that’s why you still see cargoes moving to … the Americas,” a trader said.
Mexico is among one of the world’s top gasoline importers, and typically takes non-oxygenated 92 RON and 98 RON gasoline from Asia to the west coast whenever the arbitrage is workable.
“Latin America, East Africa and West Africa seem fine [compared to the gasoline market in Asia]. Latin America is looking for eight MR cargoes loading in July,” a trader said.
ARBITRAGE TO WEST LIFTS SOME GLOOM IN ASIA
The arbitrage to the West had given the Asian market a slight boost, with benchmark Singapore 92 RON gasoline crack against front-month ICE Brent crude futures rebounding above the $5/b mark this week, S&P Global Platts data showed.
The crack stood at $5.30/b at the Asian close Wednesday, rebounding from a near two-year low of $3.38/b on July 3. The crack was last lower on August 11, 2016, at $3.17/b, Platts data showed.
However, sources expected the Asian gasoline market to remain sluggish going forward on expectations of more barrels hitting the market, which would cap further gains in cracks.
“[NYMEX] RBOB [futures] going up has driven up the cracks, and after reports of the cargoes moving out of the region, it lifted some of the gloom here in the East, but up ahead it is still very bearish,” a trader said.
“RBOB is a little more bullish now because of expected draws in [US gasoline inventories] in the following weeks due to holiday demand,” another trader said.
Meanwhile, the uptick in demand for cross-Pacific moves saw freight rates increase sharply from the previous week.
Platts assessed the South Korea-USWC voyage for MR vessels at a lumpsum rate of $1.11 million ($4.35/b) and the Singapore-USWC rate at $1.075 million ($4.22/b) Wednesday, up $60,000 and $20,000 from a week ago on July 4.
In comparison, Singapore 92 RON gasoline was assessed at $82.61/b and gasoline to Mexico was assessed at $86.65/b CIF Rosarito Wednesday.