Tanker trade ramps up as US looks to Europe to plug gasoline gap
Clean tankers are hurrying across the Atlantic with gasoline from Europe for the US where stocks are at multi-year lows at the start of driving season.
A tight European gasoline market is giving way to a US market feeling the strains of a depleted refining system and inventories at eight-year lows, prompting freight rates to rise in recent weeks.
Platts, part of S&P Global Commodity Insights, assessed gasoline RBOB New York Barges at a $144.85/mt premium to Eurobob FOB AR barges May 21.
The premium has been above $100/mt since April 13, enticing product away from Europe. As the summer driving season in the US picks up this westward, the pull across the Atlantic looks unlikely to abate in the next few months, industry participants said.
Kpler shipping data showed May gasoline exports from Northwest Europe to the US Atlantic Coast at 1.29 million mt to date, already up 593,000 mt on April. With eight days left in May, the total is likely to be significantly higher.
Freight rates for clean tankers on the route have been rising. Platts assessed Clean UK-Continent-US Atlantic Coast, basis 37,000 mt, at $45.59/mt on May 21, up from $27.90/mt on April 20.
“Product tanker demand remains strong. Gasoline inventories in the US are extremely low, particularly on the US East Coast,” Gernot Ruppelt, CCO at Ardmore Shipping Corporation told S&P Global.
Around 292,000 mt gasoline was expected to load in Northwest Europe for export to the US Atlantic Coast in the week started May 23, up 114,000 mt on the week, Kpler data showed.
The week started May 9 saw the highest exported volume since last August — peak summer driving season — at 342,000 mt.
USAC gasoline stocks fell 359,000 barrels to 51.41 million mt in the week to May 13, according to Energy Information Administration data, in what was a seventh consecutive week of inventory drawdown, to be at their lowest level since November 2014.
In Europe, gasoline inventories in the Amsterdam-Rotterdam-Antwerp trading hub fell 25% to 1.05 million mt in the week to May 18, according to Insights Global data. That left stock levels at their lowest since December and 11% below the May 2021 average.
While supply in Europe, which is a net exporter of gasoline, is tight, supply is proportionately tighter in the US.
CDU capacity, a key unit for refineries, in the US was 17.688 million b/d in Q4 2021, down 3% from the start of 2020, S&P Global’s World Refinery Database showed. Capacity at FCCs, a crucial unit for gasoline production, ended Q4 at 5.169 million b/d, having fallen a larger 5%.
Strong period ahead
Refiners across different regions have been maximizing diesel output to cover potential losses in the event of curtailed supply arising from sanctions against Russia, which has been contributing to gasoline tightness and raising cracks for the light end product, Platts Analytics said May 18.
This situation points to a bullish market for clean tankers in the weeks to come.
“With one third of the USEC refining capacity having closed down over the past two years, and given the very tight stock situation, the USEC gasoline import needs indeed are likely to stay strong throughout the summer season, supporting the product tanker market,” a spokesperson for clean product tanker company Torm told S&P Global.
Seasonal demand looks likely to compound the lack of supply, as the market enters summer driving season, a trader said.
All that has been happening against the backdrop of globally depleted product inventories. While trading at the start of the year was primarily short-haul, ton-mile has increased sharply due to a wide arbitrage between global product markets, Ruppelt said.
The most notable effect from Russia’s invasion of Ukraine has been the self-sanctioning of several Western oil companies of Russian oil, which has led to a partial redirection of trade flows as Europe looks to new supply from sources such as the Middle East, the Torm spokesperson said.
Longer ton-miles strain the availability of tonnage.
The EU’s proposal to ban oil imports would contribute to that effect.
“The trade redirection has just started, and a potential official full EU oil embargo on Russia would lead to a total redirection of Russian barrels with an even more significant impact on ton-miles,” the Torm spokesperson said.
With global mobility improving, gasoline cracks are likely to stay elevated through 2022, Platts Analytics said.