EMEA OCTANES: Key market indicators

A slowdown in the recovery in gasoline demand across Europe has seen limited trading activity in some octane boosters, with softening gasoline exports also weighing on fundamentals, while naphtha has been boosted by petrochemicals demand.

Gasoline, naphtha and butane

While European gasoline markets have found support from steady local gasoline demand, some key export outlets saw loadings fall during the week to June 4. that said, strength in the wider crude oil complex helped propel the Eurobob swap to its highest outright value since late May 2019. The front-month Northwest European gasoline crack was assessed at an average $9.78/b in the week to June 4, down from $9.80/b the previous week $10.38/b over May.

Gasoline demand in European countries was expected to continue rising, although concerns over the Delta variant has cast some doubt over a full easing of restrictions in England on June 21.

The European naphtha complex has been supported by unseasonably robust buying from petrochemicals producers. Blending margins were stable last week.

Additionally, relatively stable gasoline demand from the US is also anticipated to continue supporting European light distillates.

A common indicator of the arbitrage to the West, the Platts NYMEX RBOB contract against Brent crude futures averaged $21.28/b over the first week of June, in line with the $21.30/b average for May, and thus higher than $19.31/b for April.

With volume in short supply, the butane complex in Northwest Europe strengthened against naphtha last week, amid worsening arbitrage economics and improving demand. That represented a shift from the abundance of tons observed during most of May.

Prices have found support from stronger levels of petrochemical demand, while a recent boost in gasoline blending interest has further elevated the market. Activity in the FOB coaster market had quietened following a preceding flurry.

Ethanol

European undenatured ethanol physical spot prices moved 1.2% higher in the week to June 4 to Eur653/cu m FOB Rotterdam while T2 paper values were supported on good demand sentiment.

Market sources expected demand to continue picking up as COVID-19 related mobility restrictions are eased, which was reflected in higher July- and August-loading paper market values.

While vaccination programs continue apace across Europe, high stock levels and a lack of mobility across borders were seen as the main headwind.

S&P Global Platts calculated the ethanol average price per RON at $20.17/cu m as of June 4.

High octane components

ETBE and MTBE flat prices hit 18-month highs last week, pulled higher by the stronger oil complex while actual trading activity was limited.

But ETBE was seeing particularly bullish sentiment as market participants looked to fulfill EU mandates, sources said. Despite the sudden spike in outright MTBE/ETBE spot prices, blending economics softened late last week.

In the European MX market, limited buying interest was heard from gasoline blenders, with sources saying they have sufficient volumes of MX.