Light Ends
Market Overview
Mogas: RBOB Trade Flows
The Q1 TA Arb remains shut, Q2 TA Arb beginning to seasonally open for ARA refineries.
While waived RVP specifications have opened the door to European light ends imports into New York, the transatlantic arbitrage remains closed for RBOB, though waived RVP specifications may offer components opportunity.
The gasoline East/West spread favors Asian absorption of European volumes, with Europe increasingly competitive into central and western Latin America, while the US remains most competitive into the Caribs, ECSAM and Australia.
The EPA has issued RVP waivers for higher-PSI gasoline; however, Colonial Pipeline has left its specification unchanged.
Mogas: Waivers Cause a Reaction in Components
The US specification shift means on-road gasoline no longer aligns with the exchange deliverable, implying RBOB screen weakness.
The difference between F1 against A2 HOU blender costs shows how volatile the market has been.
Component prices have struggled to keep pace with blends, driving much of this volatility.
F1 grade components such as reformate have declined 21% since March 30th, with heavy naphtha similarly weak over the same period.
Components impacted by waivers such as alkylate will weigh on domestic blends.
Conversely, CBOB 87 A2 grade components such as light naphtha have gained over +15 cpg since the end of February.
Mogas: Naphtha
With the temporary loss of Russian supply and absence of AG supply, alongside potential run cuts across Asia and Europe, USGC naphtha export margins to Asia have reached record premiums.
Within the US light-ends complex, the specification switch has more closely aligned the domestic market with the international naphtha market.
As outlined previously, light naphtha has attracted additional premium in the US, as gasoline specification waivers have opened the gasoline blend pool to light-sweet naphtha.
This tighter integration has driven USGC export volumes to elevated levels.
Taken together, the fundamental backdrop for US naphtha remains firmly bullish.
