REFINERY MARGIN TRACKER: Margins rise as European tourism grows

As many European countries reopen their borders to travelers, exports of gasoline from both Northwest Europe and Mediterranean refiners are slowing to US and Latin America destinations, supporting strong margins on both sides of the Atlantic, an analysis from S&P Global Platts showed on Aug. 9.

The uptick in European mobility demand both for driving and flying have shown noted improvement.

This is despite a mid-July uptick in cases of the delta variant of the coronavirus, as vaccinations mitigate some travel risk. Travelers have been flocking to vacation spots as borders reopen and countries look to salvage at least part of revenues from summer tourist season.

"Vaccine effectiveness against the delta and other variants is still evident in reducing rampant transmission, but not sufficient of itself to eliminate all the risks. The narrative remains that the coronavirus is a chronic, largely controlled phenomenon, of which society will continue to adapt and respond," according to a recent research note from S&P Global Platts Analytics

As of Aug. 7, 2021, Greece has seen a 247% increase in driving activity over the Jan. 13, 2020 baseline, according to Apple's Covid Mobility data.

After the country reopened its borders on May 14, Apple's data showed driving rose almost 30 percentage points from the days prior to the loosening of travel restrictions, a trend which continues as tourism rebounds.

Margins for Mediterranean refiners have also gained, with regional benchmark CPC blend cracking margins averaging $8.49/b for the week ended Aug. 6, exceeding the third quarter average of $7.07/b.

Strong domestic demand is cutting exports of gasoline from the Mediterranean, with volumes averaging 170,000 b/d so far in August compared with July's 353,000 b/d average, according to Kpler commodity tracking data.

The same trend holds true further north.

Northwest European refiners are exporting just under 600,000 b/d of gasoline so far in August, Kpler data shows, compared with the 1.24 million b/d exported in July.

NWE Arab Light cracking margins averaged $4.32/b for the week ended Aug. 6, up from previous week's average of $3.51/b as a drop off in gasoline exports is countered by higher domestic demand as more tourists arrive. In the UK, the number of flights arriving from outside the country totaled 2,483 for the week ended Aug. 6, up from the 2,244 the week earlier, according to Radarbox.com data.

Imports into the USAC, USGC fall

On the other side of the Atlantic, US Atlantic Coast refining margins continue to surpass those of Europe. USAC Arab Light cracking margins averaged $12.79/b for the week ended Aug. 6, compared with the $11.92/b the week earlier.

USAC RINless margins – margins stripped of the cost of credits needed to comply with the Environmental Protection Agency's Renewable Fuel Standard – remain above European levels, averaging $7.90/b for the week ended Aug. 6.

However, gasoline exports from NWE to the USAC are set to average 113,000 b/d so far in August, down 126,000 b/d from July.

And it appears no gasoline exports from NWE to the US Gulf Coast have been fixed for August, compared with the 46,000 b/d exported in July from the NWE to the USGC, Kpler data showed.

USGC gasoline exports in July averaged 524,000 b/d, up 103,000 b/d month-on-month, with virtually all cargoes heading to Latin America and the Caribbean, according to Kpler.

USGC Arab Light cracking margins averaged $13.52/b for the week ended Aug. 6, while RINless margins averaged $8.02/b.