US thirst for European gasoline stalls, casting shadow on demand
LONDON (Reuters) — Europe's steady exports of gasoline to the United States have slowed substantially this year as tanks filled in the world's largest consumer nation and once-meteoric demand growth slowed.
The drop in gasoline shipments to the densely populated US East Coast is forcing European exporters to turn to less steady buyers in West Africa and compete with refineries elsewhere in the United States to export to Latin America and Asia.
Deliveries to the US Atlantic Coast from Northwest Europe this month are set to fall 35% compared with the 400,000 bpd that sailed on the route in June 2016, according to US-based ship-tracking firm ClipperData.
May imports, at 246,000 bpd, were down nearly 20% versus year-earlier levels.
"Fears of a replay of last year's gasoline glut are deterring US importers," said Matt Smith, director of commodity research at ClipperData.
"This trend looks set to continue, at least through early July, leaving higher volumes of gasoline to remain within Northwest Europe, as well as ticking higher to Asia."
Starting in 2015, US gasoline demand grew substantially, clocking in 260,000 bpd higher that year and expanding by another 130,000 bpd last year, according to the US Energy Information Administration.
But demand was down 2.7% in the Q1 2017, and the four-week average was also lower year-on-year despite hitting all-time highs in two of the past five weeks.
In another sign of the slowdown, three oil tankers, the Atlantic Pegasus, the Ardmore Seavantage and the CPO China, are ballasting—or sailing with no product inside them—from Europe to the United States.
Tankers often sail empty from one market to another when freight rates in the destination are strong, but it is highly unusual for the United States not to need European gasoline over the peak-demand summer months.
"It just doesn't make sense to ship," one trader said of the gasoline arbitrage to the United States.
Europe can also send those barrels to other regions, including West Africa, which took some 286,000 bpd from Europe in 2016, according to industry research group Wood Mackenzie, and Latin America, where refinery shutdowns have boosted the need for imports.
But US refineries have been churning out, and exporting, record volumes of fuel this year.
This has kept US gasoline inventories near the top of the 5-yr average, pressed demand to ship gasoline on a key route within the country to a 6-yr low—and made plenty available to export to Latin America.
"Demand from Latin America is going to hold up—and that will bode well for US refiners," said Steve Sawyer, head of refining with consultancy FGE.
"European refineries are the world's marginal producers. If US gasoline demand isn't as strong as we think it is, European refineries will feel the pain first."
Reporting by Libby George; Additional reporting by Ron Bousso; Editing by Dale Hudson
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