LONDON: The gasoline crack in northwest Europe declined on Wednesday, hit by weak demand and limited export opportunities, while the looming end of seasonal maintenance was expected to add to the oversupply.
"We are now staring at refinery returns but there is not enough demand for the refiners to spit their gasoline into," said one trader. "Today and for many days to come the discretionary arbitrage is closed."
Koch, Shell and Total each fixed a gasoline cargo to cross the Atlantic this week, according to Reuters shipping data. One tanker was also fixed to carry gasoline to West Africa. But traders said the economic arbitrage was effectively closed, with only occasional spot cargoes booked.
Weak margins and competition from overseas refiners that benefit from more up-to-date technology, cheaper crude and economies of scale have pressured European refiners in recent months, threatening some with closure. Seasonal maintenance has offered limited support to refining cracks.
"Once the refineries are back, we will see spot margins go down the drain again and run cuts increasing again and potentially more refineries going bankrupt," said the trader.
Saudi Aramco Total Refining and Petrochemical Company (SATORP) is offering its first gasoline cargoes from its new Jubail refinery next month, industry sources said on Wednesday and one trader said the cargoes would likely go to Asia or the Mediterranean, which are already well supplied.
The operator of Scotland's Grangemouth refinery said on Wednesday the adjoining petrochemical plant will be permanently closed and threatened to shut the 210,000 barrels per day refinery for good after halting production last week. The closure had a limited effect on naphtha.
"It could be bearish for the longer term but there is no impact until we know if the refinery closes as well," another trader said.
GASOLINE
One barge of benchmark Eurobob gasoline traded in the Platts price assessment window at $926 a tonne fob ARA. Chevron sold to Gunvor. There had been no deals for the previous three sessions.
Three barges of premium unleaded traded at $926-928 a tonne fob ARA, down from $955 a tonne on Tuesday. Morgan Stanley and Gunvor sold to Total.
Ahead of the window, five barges traded at $932-$940 a tonne fob ARA, down from $948-$955 a tonne on Tuesday.
No cargoes traded in Northwest Europe. The November swap was trading at around $918.25 a tonne fob ARA at the close, down from $938.70 a tonne on Tuesday.
Eurobob's crack to dated Brent was at around $2.675 a barrel, down from $3.615 a barrel on Tuesday.
Brent crude oil futures were down $1.25 at $108.76 a barrel by 1541 GMT.
US RBOB gasoline futures in New York were down 1.49 percent at $2.5776 a gallon, and the crack was at $10.86 a barrel.
NAPHTHA
No naphtha cargoes traded on Wednesday. One cargo traded at $911.25 a tonne cif Northwest Europe on Tuesday, down slightly from Monday's level of $915 a tonne. .
The naphtha prompt crack was at minus $7.5 a barrel on Tuesday, according to Reuters calculations.
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