Mexico's demand for Asian gasoline cargoes was seen firming further to meet April demand during Holy Week festivities and as US gasoline prices rise relative to Asian prices, market sources said March 27-29.
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Some market participants said Mexico was seeking more gasoline cargoes than usual from China in March to meet its anticipated rise in April demand.
"I am seeing seven MRs that will be brought to Mexico from Asia in March," a trader said.
China exported 71,200 mt of gasoline to Mexico in January, equating to approximately two MR tankers, up from 34,800 mt December, China Customs data showed.
"I reckon that lower Asian prices relative to the US means that cargo flows from Asia to Mexico should stay firm," a trader said.
Asian cargoes were looking increasingly attractive to buyers in Mexico as prices from its main supplier the US were being supported by lower supply and increasing demand as exports from France were squeezed by labor strikes and ahead of the summer driving season.
"If US gasoline prices rise because of reduced inflows from France, I believe Mexico will look for alternative gasoline suppliers in Asia, especially as freight has dropped quite a bit," a Singapore based trader said.
Reflecting the rising cost of US gasoline relative to Asian gasoline, the US-RBOB Brent crack stood at $33.92/b at the Asian close March 28, up from $32.98/b at the Asian close March 27, S&P Global Commodity Insights data showed.
According to S&P Global arbitrage estimates, the Singapore-west coast Mexico arbitrage has been open since October 2022 and was estimated at plus $7.42/b March 27.
MTBE demand in Mexico was also heard to be increasing for April ahead of peak summer gasoline blending season and bullish sentiment during Holy Week festivities over April 2-8.
Mexico is the biggest importer of MTBE from the US, but a rise in US MTBE prices due to strong demand from across South America has opened an arbitrage window from China, a trader said.
Around 20,000 mt of MTBE was heard traded at FOB China $940/mt for H2 April loading to Mexico on March 7, according to market sources.
"Demand for MTBE remains healthy in the South American region and we are hearing more trade discussions from Asia in the market," a source said.
Kpler fixture data shows all of Mexico's MTBE imports in 2021 came from the US. Over June-September 2022, Mexico imported 791,597 barrels of MTBE from the UAE, Qatar, Malaysia and Taiwan as octane values and MTBE prices skyrocketed to record highs on the US Gulf Coast.
The US Gulf Coast gasoline market has seen record backwardation in March amid strong prompt demand and tight supply.
Platts, a unit of S&P Global Commodity Insights, assessed the spread between prompt unleaded regular gasoline and that delivered in the sixth Colonial Pipeline shipping cycle ahead at a seasonal high of minus 9.0 cents March 23, suggesting strong prompt demand. The seasonal spread for unleaded regular gasoline was last wider on March 15, 2006, at minus 8.67 cents.
Market sources said the startup of a 250,000 b/d capacity expansion at the ExxonMobil Beaumont refinery announced March 16 would bring some relief to the tight market. It is the largest US refinery expansion in more than 10 years.
Gasoline availability in the USGC was limited at present amid seasonal turnarounds as refineries need to start producing low-volatility summer gasoline grades.
Regional inventories fell 3.128 million barrels to a two month-low of 81.982 million barrels the week ended March 17, Energy Information Administration data showed March 22. They were last lower Jan. 6 at 80.86 million barrels. However, average refinery utilization in the USGC rose to 91.3% to 89.1 in the week, suggesting most turnarounds are close to an end.
Tightening supply has seen USGC gasoline exports gaining market share from European exports that used to go to Latin America, the Caribbean, Africa and the US Atlantic Coast after Russia's invasion of Ukraine upended trade flows, and the current labor strikes at French refineries were creating further opportunities.
Total finished gasoline exports were reported at a six-week high of 892,000 b/d in the week ended March 17, a record high for this time of year, EIA data showed.
The Gulf Coast is the US' main exporter region and Mexico the main importer of its gasoline and MTBE.
Demand for low-RVP, high-octane gasoline blending components such as reformate and alkylate typically rises in spring as US summer gasoline grades require more such content and US imports of gasoline components from Asia have been constant in recent weeks amid high demand and tight production.
US customs data recorded 1.078 million barrels of alkylate imports to the USGC in the first quarter, 419,431 million barrels below a record high in Q1 2020, all sourced from India and the Bahamas, which receives alkylate from India.
Imports of reformate at 633,801 barrels in Q1 are 1.24 million barrels below the highest level seen in Q1 2021.
Kpler fixtures showed a ship with 142,477 barrels of reformate en route from India's New Mangalore refinery was expected to arrive in Houston around March 28.