Traders scramble to avert fuel shortages in US and Mexico
LONDON, Aug 31 (Reuters) - The crippling of the US Gulf Coast refining hub by Tropical Storm Harvey roiled global oil markets on Thursday as traders scrambled to buy gasoline and diesel from distant markets to avert supply shortages in the US, Mexico and Brazil.
A slew of gasoline tankers has been booked over the past two days out of Europe to the United States and Latin America, with around 12.5 MMb expected to leave the region in the first half of the month, sharply higher than usual flows, according to traders and shipping data.
Mexico's state-run oil company Pemex, which heavily relies on US fuel supplies, has over the past week booked at least seven cargoes of gasoline, or around 2.1 MMb, from Singapore, Canada and Europe, according to the same sources.
In another sign of how Harvey is opening rarely used trading routes, at least three tankers carrying diesel have been booked out of Europe and the Mediterranean to go to Brazil, which also usually draws large volumes from the US Gulf Coast. Mercuria, Glencore and Castleton booked the vessels, according to traders.
Europe typically imports diesel from the US Gulf Coast.
Around one quarter of the US refining capacity, or 4.4 MMbpd, has been shuttered over the past week as Harvey pummeled Texas, sending gasoline prices to a two-year high of above $2 a gallon.
The disruption has been made worse as the Colonial Pipeline, the biggest US fuel system, is set to shut its main lines to the Northeast by Thursday due to outages at pumping points and lack of supplies from refiners.
BAD TIMING
The outages come at a particularly bad time ahead of the US Labor Day weekend, said Olivier Jakob, strategist at Petromatrix consultancy.
"It will tighten the global picture for products, coming at a time when you start to have refineries going into maintenance before winter," he said.
Similarly, traders have booked tankers to deliver jet fuel, diesel and gasoline from Asia and even Australia to the West Coast of the US and Mexico, despite the huge distance across the Pacific, according to shipping data.
The US Gulf Coast has in recent years become a major refined product export hub, shipping nearly 2.7 MMbpd of gasoline, diesel and other fuels in May this year, according to the Energy Information Administration.
Mexico alone drew some 324 Mbpd of gasoline from the US Gulf Coast that month, accounting for nearly half of the country's gasoline demand.
Benchmark European gasoline refining margins, which measure the profit of converting crude oil into the road fuel, rose to around $21 a barrel on Thursday, a two-year high.
Gasoline refinery profits in Singapore, a benchmark in Asia, jumped to more than $15.60 per barrel, their highest level since early 2016.
Freight rates continued to climb on Thursday. Booking tankers at these rates highlights the urgency of traders to secure the supplies.
The cost of hiring a standard 37,000 ton tanker between Europe and the United States was around $17,500 per day, more than doubling from a week ago, according to ship brokers.
(Additional reporting by Jessica Jaganathan and Seng Li Peng in Singapore; Editing by Mark Potter)
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