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Atlantic Gasoline Markets Tighten as Eastbound Trade Reverses, Vortexa Says

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Global gasoline markets are tightening ahead of the peak US summer driving season as Atlantic Basin fuel flows reverse, inventories shrink and refinery constraints deepen supply concerns, Vortexa analyst Mick Strautmann said in a Wednesday note.

After roughly six weeks of gasoline and blending components moving eastward from the Atlantic Basin into Asia, the arbitrage has flipped, prompting western markets to retain more supply.

The shift comes as gasoline refining margins on both sides of the Atlantic climb to multi-year highs and US retail fuel prices reach levels last seen in 2022, Vorterxa said, citing Energy Information Administration data.

Atlantic Basin exports to the Pacific Basin hit consecutive 10-year highs in March and April as Asian refinery run cuts, driven by reduced Middle Eastern crude availability following disruptions around the Strait of Hormuz and export restrictions from China and South Korea, pulled barrels from Europe, the US Gulf Coast and Nigeria.

That eastbound trade eased in early April as crude supplies into Asia diversified and the arbitrage closed. Attention has since turned back to the Atlantic Basin, where inventories remain tight.

Northwest Europe gasoline and blending component exports to the US East Coast have begun their typical seasonal increase, but second-quarter volumes remain more than 30% below year-earlier levels and near the bottom of historical seasonal ranges.

"ARA inventories sit materially below year-ago levels... drawn down by high export levels since the start of Hormuz disruptions," the analysis said, citing data from Insights Global via Argus.

While European suppliers remain capable of serving both Atlantic and Pacific markets, competition for barrels is lifting prices.

In the US, refiners face an additional constraint: shortages of high-octane blending components such as alkylates.

US refineries are operating at elevated utilization rates ahead of summer, with Gulf Coast plants running near maximum capacity.

Still, the steepest RBOB gasoline backwardation since the post-pandemic transport recovery, which is discouraging inventory builds and is likely to keep prices elevated through the driving season, even if Hormuz-related disruptions ease.

Despite measures including a national Reid Vapor Pressure waiver of gasoline by the Environmental Protection Agency and discussions of a federal gasoline tax suspension, Strautmann said the Atlantic Basin is entering summer with its tightest gasoline balance in years.

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