Gasoline shipments bound for Europe have surged to a record high for this time of year, defying the traditional end of the continent's summer driving season as refiners prioritize lucrative diesel production, Ellie Valencia, senior light ends market analyst at Vortexa, said in a note on Friday.
Valencia said global loadings of gasoline and blending components heading toward Europe averaged 1.2 million barrels per day as of Sep. 9, 60% above the five-year seasonal average.
Though intra-continent trade continues to account for 85% of incoming barrels, an influx of non-European supply since June has offered some relief to exceptionally tight regional markets.
"As gasoline flows into Europe extend their counter-seasonal movements, 85% of incoming barrels remain associated with intra-Europe trade," Valencia said.
Flows shifted from Northeast Asia, bolstered by a partial easing of China's refined products export ban, and the Red Sea, as Saudi shipments altered routes to avoid Houthi threats in the Bab-el-Mandeb. However, recently those volumes have given way to supplies from the Atlantic Basin.
Favorable domestic conditions for ethanol have freed up domestic gasoline barrels for export in Brazil, while US refinery utilization rates, hovering near 100%, have supported record outflows of transportation fuels, Valencia said, citing the Energy Information Administration.
Despite robust demand metrics, European refiners are heavily incentivized to favor middle distillates over light ends.
Northwest European cracks for diesel and jet fuel currently sit at about triple gasoline margins.
European refiners are bracing for the seasonal uptick in diesel demand against a backdrop of tight global supply.
Though Europe directly bans Russian imports, Moscow's ongoing export restrictions on diesel have triggered a global supply crunch, forcing traditional buyers of Russian fuel to compete with European importers for barrels from swing producers.
Valencia said that even though Northwest European Eurobob oxy cracks slipped below $30 per barrel on Sep. 9 for the first time in a month, margins remain 30% higher than a year ago.
Market uncertainty persists despite a record 11 million barrels of gasoline and blending components currently laden on vessels headed to Europe.
The September-October market structure showed sharp volatility this week, swinging from a backwardation of about $15/bbl on Sep. 8 to about $10/bbl the following day.
Though historical backwardation typically hovers between $2/bbl and $5/bbl, the persistence of wide backwardation underscores that the close of the summer driving season has done little to alleviate tight market fundamentals across Europe.