Atlantic Basin gasoline: tightest balance in years<\/p>\n
The east-west gasoline spread has flipped after 1.5 months of Atlantic Basin barrels heading east, prompting western markets to pull back supplies. At the same time, gasoline cracks have surged to multi-year highs on both sides of the Atlantic. US pump prices are at highs last seen in 2022 (EIA) while inventories are standing lower than year-ago levels in most Atlantic Basin markets. This confluence of factors combined with other Hormuz-linked constraints are causing supply disruptions ahead of the demand-heavy summer US driving season.<\/p>\n
Europe pivots from Asia to the US<\/p>\n
Atlantic Basin gasoline\/blending component exports to the Pacific Basin surged throughout March and April, posting two consecutive dataset-highs (10-year). Asian refinery run cuts given the lack of Middle Eastern crude availability post-Hormuz closure and export restrictions out of China and South Korea opened the arb, pulling barrels from Europe, PADD 3 and even Nigeria to the East.<\/p>\n
The strong inter-basin rebalancing, combined with rising crude arrivals into Asia from alternative providers, closed the West-East gasoline arb in early April, and liftings have dropped off, albeit still at seasonal records. Since then, the focus has shifted to the Atlantic Basin, where the balance has tightened.<\/p>\n
Northwest Europe gasoline\/blending component exports to PADD 1 have started to rebuild in April following the seasonal pattern, but the flow so far in Q2 has been consistently over 30% lower y-o-y and stuck at the bottom of the seasonal range.<\/p>\n
ARA inventories sit materially below year-ago levels (Insights Global via Argus) drawn down by high export levels since the start of Hormuz disruptions. While Europe remains structurally long and can continue to deliver supplies in both directions, competition drives up prices, and the US is facing another issue: blending components. The shortage centres on high octane blendstocks, alkylates.<\/p>\n
US refineries run hard, but still capacity-constrained<\/p>\n
US refineries are running hard into summer, with utilisation above year-ago levels across PADDs 1 and 3, with PADD 3 close to maximum (EIA). But the supply response has limits, and a key one is the availability of high-octane blending components.<\/p>\n
India alkylate exports to PADD 1 are down 78% y-o-y in April, to ~17kbd, after India directed refiners to maximise propane and butane availability for domestic LPG cooking demand, cutting feedstock to alkylation units. India has historically been a primary alkylate supplier to the US Atlantic coast \u2013 a key component of summer spec gasoline. The disruption is mirrored on the other side of the country, where Asia blending component (mainly alkylates) exports to PADD 5 have fallen to ~14kbd in April, down 80% m-o-m and 65% y-o-y.<\/p>\n
The US is currently seeing the steepest RBOB backwardation since the post-COVID transport recovery, discouraging component stockbuilds, which will likely keep prices elevated throughout the driving season regardless of any potential in Hormuz reopening.<\/p>\n
Despite some measures for demand-side intervention, such as the EPA\u2019s national RVP waiver earlier this year, and recent talks about a federal gas tax suspension, the Atlantic Basin is entering summer with its tightest balance in years.<\/p>\n
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