By Robert Campbell
NEW YORK, April 19 U.S. gasoline traders are
bracing for higher imports from Europe as a slump in European
benchmark prices has re-opened the door to arbitrage shipments
to the New York Harbor.
European cash gasoline prices spiked in late March as heavy
regional refinery maintenance cut into supplies, sending cash
Eurobob gasoline blendstock prices in the
Amsterdam-Rotterdam-Antwerp hub above New York Harbor cash RBOB
But since peaking on March 30, ARA Eurobob prices have
tumbled against New York Harbor RBOB, falling to a nearly $4 per
barrel discount as of Wednesday.
While modest compared to historical discounts, it has
cracked open the arbitrage window at a time when U.S. gasoline
stocks, relative to demand, are healthy.
The mounting European gasoline discount coincided with a
rebound in stocks of gasoline held in independent storage at the
ARA hub, which suggests European gasoline output has swung back
into a modest surplus in recent weeks.
At the same time, chartering activity in so-called clean
tankers for carrying refined products, has recovered, with at
least six vessels chartered this week to carry cargoes from
European ports to destinations in the Americas.
Imports from Canadian refineries also seem to be on the rise
with a number of cargoes being offered to buyers in the New York
Harbor in recent days.
Little wonder that cash gasoline prices in the United States
are starting to come under sustained pressure.
Even if this European gasoline does not come directly to the
New York Harbor and goes instead to, say, Mexico or Brazil, the
pressure it will exert on gasoline prices in the Americas is
After all, any supplies Mexico buys from Europe simply
offset cargoes they may have instead picked up from U.S. Gulf
All of its is starting to feed into the futures market. RBOB
gasoline futures have switched from leading the oil
complex higher throughout the first quarter to being the worst
performer since the start of April.
RBOB gasoline futures are down more than 5.6 percent
since the start of the month, outpacing a 3.3 percent decline in
Brent crude and a 1 percent fall in heating oil futures
THE OIL MARKET STILL WORKS
None of this should really come as a surprise.
Notwithstanding the histrionics of politicians of all stripes,
this spring's spike in gasoline prices has triggered the exact
sort of supply response needed to keep the market balanced.
If the flood of speculative money into RBOB futures has done
anything, it has probably only sped up the supply response from
the physical market, which ought to bring prices down.
And consider that this moderation in gasoline prices has
come amid a reduction in regional refining capacity. Two
Caribbean refineries and two Philadelphia-area plants are shut.
Add to that the Petroplus facilities in Europe that
are at least temporarily closed. In other words, even with lower
refining capacity in the Atlantic basin, the supply response
looks to be coming quickly.
And this is happening without the full power of the U.S.
Gulf Coast's complex refineries being brought to bear. Gulf
Coast refineries ran at only 83.7 percent of capacity last week,
according to the Energy Information Administration, likely due
to seasonal maintenance.
With routine turnarounds wrapping up over the next few
weeks, U.S. gasoline production should continue to climb. Add to
that the expected start of the Motiva Port Arthur refinery
expansion, which will gradually start to add even more gasoline
to the mix as it ramps up output.
So even before we consider the impact of the brave, or
perhaps foolhardy souls who are thinking about stepping into the
refining business by restarting plants belonging to Petroplus in
Europe and ConocoPhillips in the Philadelphia area, it
looks like gasoline may well have hit its peak against crude for
With demand in major consumption centers under pressure from
increased fuel efficiency and the slow recovery in employment,
it seems more likely that the risk for the summer is too many
gasoline barrels chasing too few buyers than vice versa.