Well-supported NWE ethanol trading at five-month high vs gasoline

With a host of factors supporting the Northwest European ethanol market, it has been trading around a five-month high versus gasoline, which has seen US demand tumble of late, sources said.

Rallying global ethanol feedstocks prices squeezing crush margins, an uptick in European land mobility on lockdown restrictions easing in several countries, and a closed arbitrage from across the Atlantic to the structurally short EU market have pushed T2 ethanol prices to six-month highs in recent sessions.

The blendstock's premium to Eurobob gasoline reached $337/mt -- its highest since Dec. 21 -- on April 27 before easing back to $307/mt on April 28, S&P Global Platts data showed. T2 ethanol was at Eur619/cu m ($747/cu m) FOB Rotterdam on April 28, after hitting levels last seen on Oct. 21 at the previous close.

Commodity data company Kpler showed around 320,000 barrels of gasoline were expected to be delivered to the US Atlantic Coast from Northwest Europe in the latest week, down from 1.38 million barrels the week before to the lowest level since mid-January.

Low freight rates and surging US gasoline demand had previously helped maintain favorable arbitrage economics across the Atlantic basin. "The trans-Atlantic [gasoline] arbitrage is not open to everyone now," a trader said.

Gasoline's relationship to other blendstocks has also weakened amid the pivot to a weaker export outlook.

Its premium to naphtha narrowed in the paper market with the May Naphtha CIF NWE cargo swap assessed at a $67.25/mt premium to the equivalent Eurobob FOB AR barge swap, down $9.25/mt on the week to the lowest level since March 31.

Discounted Mediterranean gasoline may further pressure Northwest European markets, with sources saying arbitrage from the Mediterranean to the Amsterdam-Rotterdam-Antwerp hub was open.

The Mediterranean gasoline is being blended into storage tanks in the region, and may disincentivise production of the more costly gasoline at Northwest Europe refineries.