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Asian gasoline cracks hit record high as summer driving boosts demand

Highlights

Singapore 92 RON gasoline physical crack strengthens 24.9% on week

Mobility on the rise despite soaring fuel prices

Medium-term sentiment bullish as Q3-Q4 gasoline swap spreads widen

A resurgence of car travel during the peak summer driving season following eased pandemic restrictions has bolstered the Asian gasoline market, leading crack margins to hit all-time highs, with swaps market trading activity signaling strength for the medium term, S&P Global Commodity Insights data shows.

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The benchmark Platts FOB Singapore 92 RON gasoline cargo crack against the front month ICE Brent crude futures strengthened $7.56/b, or 24.89% week on week to an all-time high of $37.93/b at the Asian close June 22, according to S&P Global data.

Asian gasoline market supply has tightened amid soaring summer demand and increasing volumes of finished cargoes and blendstocks shipping to the US market.

OPEC forecast June 14 that gasoline is expected to lead global oil demand growth in second-half 2022, closely followed by LPG, middle distillates and naphtha. Gasoline and diesel are expected to record the highest gains among petroleum products year on year on the back of increasing mobility and healthy global industrial activity.

"Going forward, [global] refinery intakes are expected to rise further to accommodate a seasonal pickup in fuel consumption and to replenish stocks," the oil producing bloc said.

Asia mogas swaps hit record

Trading activity in the swaps market reflected firm sentiment extending beyond the peak summer demand season, as mobility restrictions are relaxed across the globe.

The front month July-August Singapore 92 RON gasoline swap timespread reached a record high of plus $7.99/b June 22, widening 47 cents/b on the day, S&P Global data dating back to Oct. 2, 2008 showed.

Further along the derivatives curve, the Q3-Q4 Singapore 92 RON gasoline spread, an indication of medium-term sentiment, widened 52 cents/b on the day to an all-time high of plus $18.69/b June 22, according to S&P Global data going back to Sept. 1, 2016.

The key front month FOB Singapore 92 RON gasoline swap crack spread against Brent swaps also reached record levels, widening $7.93/b, or 28.70% on the week to $35.56/b at the Asian close June 22, S&P Global data dating back to March 15, 2010 showed.

American demand key driver of gasoline

Meanwhile, US President Joe Biden June 22 called on Congress to waive federal taxes on gasoline and diesel through September to ease the burden of soaring prices.

The US national average retail regular gasoline price topped $5.01/gal for the first time in history June 13, gaining 13 cents/gal on the week and $1.94/gal on the year, according to Energy Information Administration data. The federal government collects 18.4 cents/gal for gasoline and 24.3 cents/gal for diesel.

"A planned cut in federal taxes on gasoline will be too little too late but should be bullish [for] fuel consumption anyway, if it helps reduce pump prices," Vandana Hari, CEO of Vanda Insights said.

The American Automobile Association said June 21 it expects car travel to set a record with 42 million people hitting the road over the Independence Day weekend June 30-July 4, despite historically high gas prices.

"The fact that travelers will surpass the peak of 41.5 million in 2019 amid soaring gasoline prices on pump by over $5/gal, we can continue to expect higher energy prices with lagging counter supplies," Avtar Sandu, senior manager of commodities at Phillip Futures said in a note.