NEW YORK (Reuters) - A gasoline cargo is set to make a rare voyage to Australia from the U.S. Gulf Coast as swelling stockpiles have suppressed regional prices, opening up this unusual arbitrage opportunity, sources familiar with the matter said this week.
Gulf Coast gasoline prices have hit their lowest seasonally since 2016 as inventories hover above the five-year average, according to U.S. Energy Information Administration data.
Atlantic Trading & Marketing Inc (ATMI), the U.S. trading arm of French oil major Total SA, has fixed the Long-Range 2 (LR2) vessel Marlin Lavender to load gasoline from the U.S. Gulf Coast to Australia in early July, according to a source familiar with the fixture and a shipping report seen by Reuters.
That would be the first such LR2 cargo from the U.S. Gulf Coast to Australia in at least four decades, based on Customs data via Refinitiv Eikon. The vessel is headed to the Gulf Coast from Africa.
The LR2 is one of the largest vessels capable of transporting refined products and can carry about 750,000 barrels of gasoline, market sources said.
ATMI also recently chartered a smaller Panamax vessel, Lian Yang Hu, to transport gasoline from the U.S. Gulf coast to Australia, according to the source and vessel tracking data on Refinitiv Eikon.
ATMI did not respond to a request for comment.
Cash prices for CBOB gasoline on the U.S. Gulf Coast have dropped to the lowest seasonally since at least 2016, according to the earliest available Refinitiv Eikon data. On Tuesday it traded at 16.75 cents per gallon below NYMEX gasoline futures, traders said.
“Refiners have been returning from maintenance on the Gulf Coast and ... now (that) they are increasing refining utilization, there is a significant amount of excess gasoline that needs to be exported,” said Andy Lipow, an analyst at Lipow Oil Associates in Houston.
“As that happens, we saw the cash differentials fall precipitously, enabling the arbitrage to open up, especially on larger vessels.”
Gulf Coast gasoline stockpiles are steady compared to this time last year when they were at a record seasonal high, according to the EIA. [EIA/S]
Higher crude costs and worries about demand have pressured U.S. gasoline refining margins. Global demand growth in the first half of 2019 was lackluster, due in part to stalled U.S. gasoline and diesel consumption, the International Energy Agency said last week.
Reporting by Devika Krishna Kumar in New York; Additional reporting by Stephanie Kelly; Editing by Richard Chang