Total gasoline and components shipped to the U.S. from Europe, Baltic, and east of Suez refineries was 1.98mn metric tons in April 2018, a record high, according to Genscape's European Waterborne Products Report.
A spring surge in transatlantic gasoline shipments to the U.S. is not unusual. Seasonally, gasoline demand in the U.S. is the strongest in the summer, with demand rising in May through August. Every year, gasoline specifications shift to summer grade in mid-April, which triggers a rise in both CME RBOB futures and spot market differentials in New York Harbor due to the increased cost of blending. Summer grade gasoline blendstocks for oxygenate blending (CBOB or RBOB) have low Reid Vapor Pressure (RVP) specifications that require more expensive heavy blendstocks such as alkylate to meet the heavier gravity requirements when blending 10 percent ethanol.
As a result, the annual pre-summer rise in prices, which traded as high as $2.1523/gal for the June CME RBOB futures contract on April 30, typically creates spring arbitrage opportunities to move transatlantic gasoline and gasoline blendstocks to PADD 1. This pre-summer price rise appears to be supported this year by both quality specifications and support from crude oil prices, rather than strong gasoline fundamentals – front-month CME light sweet crude futures have strengthened over $10/bbl since the beginning of 2018 to $70.73/bbl on May 7. U.S. gasoline stocks were 238mn bbls for the week ending April 27, according to the EIA, only 1.3 percent below 2017 levels and near the upper end of the five-year range for inventories.
In addition, rising gasoline prices appear to have curbed gasoline demand relative to last year, with the four-week rolling average of demand at 9.448mn bpd for the week ending May 4, according to Genscape's Weekly Gasoline Demand Report, down 0.86 percent from 2017 levels.
The previous highest volume shipped in a single month was seen in June 2016, at 1.907mn tons. This year the arbitrage sprung up quickly from the low levels over the winter months and neared 2mn tons in April, according to Genscape. This volume includes gasoline blending components such as alkylate and reformate which are imported heavily by the U.S.
The April cargoes included an unusually high volume from the Mediterranean, over 300,000 tons as well as fairly high volumes from India and Baltic. Most of the volume was booked during the spike in the price differential between Northwest Europe and New York harbor that started around March 9 and lasted to the end of that month, reaching about $150 per ton at the peak.
Genscape monitors refined product tanker shipments to, from and across Europe in its European Waterborne Products Report, published twice weekly. This includes cargo grade assessments and various analytics to help traders better understand flows as they happen. To learn more, or to request a free trial, please click here.