FEATURE: Gasoline imports into US Atlantic Coast at lowest level in at least four years

New York — Gasoline imports into the US Atlantic Coast January through August plummeted 39.3%, as mostly open arbitrage plays could not overcome coronavirus pandemic-dampened demand.

An analysis of US Customs data showed that total imports through August into the region stretching from Florida to Maine were at their lowest level since 2016, the first year that S&P Global Platts started receiving the data. The USAC is a market reliant on CIF cargoes as well as pipeline supply from the Gulf Coast to supplement the few refineries in the region.

"The market has had to deal with an excess of stocks since coronavirus shutdowns, and the first thing a CIF market will generally do is to shut off imports," an Atlantic Coast market source said.

Demand fell 40% from normal levels as lockdowns reached their height in April, but gradually increased to hold steady at 10% below last year levels as the extent of the lockdowns was minimized and people began driving for summer vacations, the source said.

Total gasoline imports plunged 49.2 million barrels year on year through August, at 76 million barrels. RBOB, which is required for most metropolitan areas, was the biggest draw in the first eight months of 2019 at 65.3 million barrels, or less than a cargo a day. This year, only 41 million barrels of RBOB gasoline were imported, or nearly a cargo every other day. A generic gasoline description accounted for the next largest import segment, at 24.74 million barrels compared with 42.68 million a year ago. Further details cited mostly finished 87 gasoline or cat gas for the grouping, both of which would need significant blending even before accounting for ethanol requirements to meet East Coast gasoline regulations.

ARBITRAGE OPPORTUNITIES

According to S&P Global Platts Analytics data, the spot arbitrage for imports from Europe has been open every month since last summer, except for March. Platts assessed New York Harbor barge RBOB at a record low of 28.83 cents/gal on March 23 and it had steadily rebounded to 126.24 cents/gal on Sept. 3.

"The spot arb from Europe has been consistently open and even though trade flows are recovering they lag last year's," said Lenny Rodriguez, an analyst with Platts Analytics. "Central Atlantic gasoline inventories have been coming off since June. From a historical perspective, they are still comfortable but way lower from touching historical highs earlier in the year.

Energy Information Administration data showed that stocks began accumulating in late March as the pandemic lowered demand.

Market sources were mixed on how favorable the arbitrage really was.

"The arb might be workable but I can't say there is a lot of money in it," a second market source said. "But contango is keeping most of the barrels in the tank. You have to pay someone to take barrels out," the source added. "Yes, as of now arbs work for some, but merchant blenders are not sending barrels."

A third source said that would mean that gasoline is even weaker with even less demand from Europe.

"Europe needs to dump their gasoline, and NYH is usually a good dumping ground," the source said.

Canada is a consistent exporter into the USAC, but Europe is a key swing exporter to New York, Florida and other states. Gasoline imports from Europe have fallen dramatically – by 43.2% – in 2020, according to Kpler. The commodity data company estimated volumes of gasoline making the voyage across the Atlantic at 45.05 million barrels, compared with 79.37 million barrels for the same eight months in 2019.

The significant fall is largely driven by the coronavirus pandemic and the precipitous drop in demand for refined oil products experienced not only in the US but most other areas of the world including Europe. At the height of the pandemic in April, 2.26 million barrels of gasoline was exported from Northwest Europe to the US. In April 2019, 12.57 million barrels were exported.

EUROPEAN STORAGE

Instead of moving to the US, European gasoline was stored on land or in floating storage on the back of a strong contango market structure. Traders took forward positions and bought storage with the expectation that demand, and therefore prices, would recover later in the year.

Typically, gasoline imports from Europe increase during the summer months as US demand spikes during the busy driving season. This year, far fewer people made journeys by car in the US due to restrictions bought about by the pandemic.

Market sources suggested an ample holdover amount of summer grade, low RVP stocks was another factor driving imports down this year. The Atlantic Coast had higher-than-normal imports last summer due to earlier delays in building stocks. Refinery issues in the West Coast in the start 2019 sidetracked a larger pool of cargoes that may have instead headed to the USAC, leaving that region with low stocks at the start of the summer. This led to higher-than-normal volume of imports into the Atlantic Coast to meet summer demand last year.

Canada supplied 35%, or 26.5 million barrels, of all USAC gasoline imports in 2020, compared with 27% for all of 2019, and mostly from Irving Oil to supply its network in the US Northeast. Three-fourths of those imports were RBOB, at 19.7 million barrels. CBOB imports followed at 4.96 million barrels, or 19%, and then PBOB at 1.37 million barrels or 5%.

The Netherlands supplied 16% of imports, or 12.36 million barrels, followed by the UK at 8%, or 6 million barrels. The Netherlands last year supplied 25% of USAC gasoline and the UK 11%.