European oil product margins spike in Harvey's wake
Benchmark European gasoline refining margins spiked nearly 9% on Tuesday to their highest since April after more than 2 MMbpd of US refining capacity was knocked offline by Hurricane Harvey.
Margins, the profit from refining crude into gasoline, hit $15.45/bbl in morning trade. Benchmark diesel margins also stood more than 16% above the low hit just a week ago, amid concerns about cargoes diverted away from Europe.
Harvey knocked out 13% of refining capacity in the US, the world's largest oil consumer, while the continuing rain and flooding threatened other units, including the country's largest refinery.
The shutdowns are expected to prompt a late-year spike in gasoline bookings from Europe to compensate for output losses. Buyers in the US and in Latin America, which has been reliant on US exports, could turn to Europe, traders said.
"Owners are being asked to provide transatlantic options on cargoes being shipped out of the Med or NWE with the view to diverting cargoes to the US or Latin America," said Andrew Wilson, head of energy research at shipping firm BRS Brokers.
US gasoline prices surged to two-year highs on Monday to $1.7799 per gallon. By 1039 GMT on Tuesday, they were trading at $1.7014.
Between Friday and Tuesday, at least eight vessels were booked to sail from Europe to the US, trade sources told Reuters, a slightly higher figure than normal and above the levels of recent weeks.
Freight rates on the route rose as a result of enquiries, hitting 150 on the World Scale on Tuesday, up from about 107 in the middle of last week.
Trading and shipping sources said other cargoes, including diesel and jet fuel booked for Europe, could be diverted to the US or Latin America to fill the gap left by refinery closures.
One vessel, the Hafnia Daisy, loaded with diesel in the US Gulf and bound for Europe, had turned around by Tuesday.
PVM Oil and Associates said Latin America typically imported about 1 million bpd of gasoline and diesel, so any buy who did not secure alternative supplies "especially Mexico, will find itself in the middle of a fuel shortage."
(Reporting by Ahmad Ghaddar and Libby George; Editing by Mark Potter and Edmund Blair)
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