Light Ends
Market Overview
Mogas - ARA to NYH flows
The front of the transatlantic arb has seen unusual demand from NYH, with expectations of increasing gasoline import volumes reflected in upcoming EIA reports.
As US draws continue through the summer, the transatlantic arb is likely to strengthen.
Leaving RVO exposure within the transatlantic arb may prove advantageous, as the RINs market is showing strength driven by a tightening feedstock picture and declining RINs production.
This has pushed the transatlantic arb into negative territory for June ARA blenders.
Mogas - Houston re-establishes mid-summer LATAM market share
The prompt export market for June cargoes appears weak as delivery windows for Houston origin still remain widely in favor between ARA in the Atlantic and Singapore in the Pacific.
Against the backdrop of US commercial destocking, Houston has re-established economic export premiums over ARA across much of Central America in July.
This implies strength in US exports in mid-summer, as US consumers are facing comparatively less demand destruction than their Asian and European counterparts.
This also implies in July, GC CBOB/RBOB spread may turn bullish as Houston regains market share. However, key risk remains growing market chatter around a potential refined products export restriction, should inventories continue to deplete over the summer.
In such a scenario, US inventories would quickly rebound, triggering a sell-off across RBOB spreads, RBBR, GC CBOB/RBOB, and transatlantic arbs.
Mogas - A-Grade and M-Grade margins negative
Reformate and alkylate differentials to RBOB have continued to gain through May as fuel specifications switch.
RVP-waived grades currently trading most closely resemble A-Grade A1, which has seen blend costs rise as octane values tighten and waivers continue to be granted.
Mogas - Naphtha
NYH blenders are responding to declining PADD 1 gasoline stocks by increasingly sourcing heavy naphtha from Rotterdam and via non-Jones Act vessels from Houston to capture blending opportunities within the region.
Houston exporters are similarly benefitting from Latin American demand, driven by diluent requirements.
