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Europe’s gasoline profits tumble to five-month low as US supplies rise

07.28.2014  | 

Gasoline’s crack, a measure of refining profit, fell to the lowest in almost five months in Europe as domestic demand declined and supplies surged in the US, the continent’s main export market.

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By PRIYANKA SHARMA and LANANH NGUYEN
Bloomberg

Gasoline’s crack, a measure of refining profit, fell to the lowest in almost five months in Europe as domestic demand declined and supplies surged in the US, the continent’s main export market.

The crack, or premium to Brent crude, fell 3 cents to $8.54/bbl, according to data from PVM Oil Associates Ltd., a broker in London. That’s the least since Feb. 28 and is down 36% this month. Gasoline supplies in northwest Europe are the highest for this time of year since 2010, while US supplies climbed to the most in four months.

“Demand in Europe is lackluster,” said Steve Sawyer, an analyst at FGE, an energy consultancy, by phone from London on July 25. “Europe relies on demand in the US, which is starting to wane.”

Europe consumed 1.92 million bpd of gasoline in April, the most recent month available in data from the International Energy Agency. That’s down 30,000 bpd from the previous year and 3.5% lower than the average in 2012, data from the Paris-based adviser to 29 nations show.

Gasoline stockpiles held in independent storage at the Amsterdam-Rotterdam-Antwerp oil hub rose 5.3% to 873,000 metric tons in the week to July 24, according to data from PJK International BV, a researcher in the Netherlands.

Europe typically sells its surplus gasoline to the US, where refiners have boosted domestic fuel production amid rising crude output from shale deposits. That’s reduced the nation’s need for imports, exacerbating the oversupply in Europe.

Refining Peak

“US refineries are running at peak utilization,” Ehsan Ul-Haq, senior market consultant at KBC Energy Economics, said by phone on July 25 from Walton-on-Thames, England. “So the US produces more than enough gasoline and doesn’t need too much from Europe any more.”

Refinery utilization in the US has been stable at 93.8% since July 11, the highest level since 2005, according to US Energy Information Administration data.

“The crack will weaken further,” Sawyer said. Ample supplies will cause US prices to drop, diminishing the profit for European refiners who intend to shiptransatlantic cargoes of gasoline, Sawyer said.



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