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Market Overview

Bearish Aug E/W as European gasoline exporters losing outlets East of Suez

Mogas

Expectations of more readily available Middle East gasoline and an expected rise in Middle East crude flows to Asia (and therefore higher runs and more gasoline supply) have pushed the prompt E/W pricing even lower.

Gasoline pricing in the aftermath of the Iran-US peace deal signing suggests East of Suez supply is going to build faster than in the West, bad news for European refiners.

Unfavourable arbitrage economics to East of Suez outlets will continue to push European exports into LATAM and PADD 1, however any extra/delayed RFCCU maintenance at Dangote could also improve export margins into WAF.

East African gasoline buyers are already reverting to Middle East supply as AG barrels re-enter the market, removing a key outlet that had been supporting European export economics.

Gas-nap strength has room for more

Naphtha

Gas-Nap levels have climbed again in response to the signing of the Iran-US peace deal, grounded on the view that lifting restrictions on Strait of Hormuz transits will boost naphtha supplies to the global market more so than for gasoline.

While levels are high on a year-to-date basis, Gas-Nap levels have been seasonally higher by almost double current levels.

Recent weakness in TC5, amid general weakness in freight rates, also paves the way for more naphtha exports and therefore further support for Gas-Nap. To balance this, we will at some point need to see a sustained recovery in Asian cracker utilisation rates.