Egyptian refiners offer rare gasoline cargoes as African demand slumps

In a rare move this week, Egyptian refiners Middle East Oil Refinery and Egyptian General Petroleum Corporation emerged to offer gasoline cargoes for prompt April-loading dates as domestic demand continues to spiral lower amid the COVID-19 pandemic.

EGPC Thursday offered 27,000-33,000 mt of 95 RON gasoline for loading over April 16-18 from Alexandria, according to open tenders seen by S&P Global Platts.

The company, a typical importer of gasoline, has taken at least three to five MR-sized gasoline cargoes per month on a spot basis since the beginning of 2020.

In 2019, EGPC's monthly gasoline intake stood at around five to six MR-sized cargoes on a spot basis, Platts calculations showed.

Earlier this week, Midor offered 30,000 mt of 95 RON gasoline for April 10-12 loading from Alexandria. The last time Midor offered a gasoline cargo was in June 2019.

"The tenders just show you how much demand has been hit," a Singapore-based market source said. "When typical importers sell you know things are bad."

Another source based in the Middle East pointed to tightened measures in Egypt aimed at countering the spread of the coronavirus. On March 25, the country started a two-week curfew, with both public and private transportation suspended from 7 pm to 6 am daily.

According to media reports, schools and universities in the North African nation, which have been shut since March 14, will remain closed for another two weeks, while government offices will not be open to the public at least until mid-April.

As of early Friday, Egypt has 865 confirmed coronavirus cases and 58 deaths.

Slowing African demand to shut Asian arbitrage

Other African nations are also experiencing reduced gasoline demand as more countries in the continent go into lockdown.

West Africa, an avid buyer of European gasoline, had shown an increasing interest for Asian cargoes earlier in March, but this demand has since diminished with the continued spread of the coronavirus.

Nigeria -- the leading consumer of road fuels in West Africa, with a typical monthly gasoline utilization rate of 1 million-1.25 million mt -- has stopped buying gasoline, with state-owned Nigerian National Petroleum Corp. saying the country has adequate stocks of gasoline to last for over 60 days.

Nigeria's NNPC is the sole importer of refined products into the region, and typically takes advantage of low crude prices to keep stock levels elevated offshore, a proven support for Asian and European exports.

"The [gasoline] flat price on paper should make sense for Nigeria to import gasoline, but the lack of US dollars, or new bank lines is also an issue," a European market source said.

A third market source said: "The outlets for arbitrage are shut. Everywhere is facing demand problems with the coronavirus. Asia's oversupply can only get worse from now on."

Reflecting the worsening Asian demand-supply dynamics, the contango in the Asian gasoline market has sunk to record lows.

At the close of Asian trade Thursday, the balance April/May Singapore 92 RON swap spread was assessed at minus $2.42/b, while the front-month May/June swap spread was assessed at minus $2.50/b, Platts data showed.

Against this backdrop and with a steep contango in Europe, there have been an incentive to place gasoline in storage, traders said, driving up competition for ships that may typically be floating offshore Nigeria.

"It seems that most of the demand now is for storage," a second European market source said. "We were just counting that MR vessels are starting to make sense as floating storage [in Europe]. It is really bad, it will cause freight [rates] to increase a lot."

Some refineries in Africa close as demand slows

With local inventories soaring as demand weakend, some refineries in Africa have also opted to close operations or are considering run cuts.

Chad's Ndjamena refinery in Djarmaya has decided to temporarily suspended processing activities because of overproduction, local media reported, citing the oil minister. The refinery halted activities last week in order to help reduce the surplus of stocks.

The Engen refinery at Durban, South Africa, also decided to shut down temporarily from March 27 "due to forecast lower demand for petroleum products during the national lockdown."

"With Engen's product inventory currently high and building up fast, a controlled safe shutdown of the Engen Refinery is inevitable," it said.

Meanwhile, South Africa's Sasol said some of its plants in South Africa may have to reduce throughput due to lower product offtake during the country's lockdown. The company, which operates the Natref refinery, said some plants "will be required to reduce throughput" or "potentially shut down" due to reduced demand.