West Africa demand diverts NWE gasoline exports from North America
Growing gasoline demand in West Africa is pulling more supply from Northwest Europe, curtailing exports to the New York Harbor and shifting the focus of traders there to securing August supply. Sources on both sides of the Atlantic said this week that exports from NWE to the US Atlantic Coast trading hub will fall in August as the arbitrage becomes less profitable and netbacks to other regions grow.
“Imports are expected to be lower based on next month’s NWE strength but ships are still coming,” one US market source said. “How much that changes later in August is an unknown for now.”
The main competition for NYH traders is West Africa, where Nigeria has begun to pull for its 8.45 million barrel quota for August. The demand has already started to affect NWE gasoline prices. FOB Rotterdam Eurobob barges were assessed Wednesday at $7.2625/mt (about $2.03 cents/gal), an 11-day high.
“It’s not the US that is dropping,” a NWE source said. “West Africa take is genuinely good, and Canada is continuing to pull. People are just choosing what is the best netback.”
The flows to West Africa are evident, with fixtures into the region seeing a lift this week. Thirteen ships carrying a total of 4.65 million barrels of gasoline were heard headed from NWE to West Africa.
“At the moment, it’s business as usual in West Africa. Yet we could see an increase [of buying] in the second half of August,” a second NWE trader said.
NYH AUGUST PRICES CLIMB
Cash NYH RBOB for delivery through the rest of July fell Wednesday to NYMEX August RBOB plus 0.45 cent/gal, its lowest differential since June 27. The benchmark price has fallen 1.90 cents/gal over the last eight trading sessions.
August demand for the same barrel has grown over the same period, pushing prices higher. The RBOB ratable for August was assessed Wednesday at NYMEX September RBOB plus 2.30 cents/gal, one of its highest levels since November, when it was winter-grade specification.
The spread between those two assessments — the premium for prompt supply over future barrels — narrowed Wednesday to 1.95 cents/gal, one of its slimmest margins since June 29.
US traders said the prompt market has fallen as sellers shed barrels ahead of a new month, while buyers have focused on future supply because imports into the region look to be lower than expected.
“Perception is imports will be far less in August,” one US trader said.
The US Atlantic Coast imported 6.34 million barrels of gasoline from Europe and the Mediterranean in the first 20 days of July, nearly double the amount during the same time last year, according to US customs data. In 2017, those imports totaled 7.24 in August, nearly 1 million barrels higher than July.