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The Northwest European gasoline complex has come under pressure this week from a closed arbitrage to the US, a lack of significant West African demand and with the end of year approaching, sources said.

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As a consequence, cash premiums have hit six-week lows and the Eurobob paper market has weakened to more than eight-month lows.

The front-month/second month Eurobob contango deepened Tuesday to an eight-month low of $2.75/mt, down from $2.50/mt Monday, while the Eurobob crack swap rose 20 cents/b from an 11-month low of $7.40/b reached Monday, S&P Global Platts data showed.

The last time the front-month Eurobob crack was assessed lower was December 20, 2016, while the last time the front-month/second month contango was deeper was March 31, according to Platts data.

In the physical market, Eurobob gasoline barges were assessed at $585.25/mt Tuesday, down $1.75/mt day on day to be at a $1.50/mt premium to the January Eurobob gasoline swap, down from $4/mt Monday to the lowest physical premium over the front-month swap since October 19.

"There is a lot of gasoline around [in Northwest Europe] and some volumes are not finding homes," a gasoline trader said. "The arbitrage to the US is closed and people are moving a minimum amount [of gasoline] to West Africa for DSDP as economics are so poor to deliver cargoes to Nigeria," he said.

According to trading sources, gasoline imports into Nigeria were mostly done via DSDP cargoes, i.e. part of the Direct sale Direct Purchase program organized by Nigerian National Petroleum Corp.

Meanwhile, the trans-Atlantic arbitrage was particularly difficult to work with only two Medium Range tankers having left Northwest Europe over the past seven days to go to North America.

"There is not much blending going on...everyone is closing their book for the year and the Middle East is the only region attracting barrels," another gasoline market participant said.


As a result of weak blending demand, both butane barges and CIF coasters softened Tuesday, as traders looked for support from petrochemical buyers, who use butane as an alternative feedstock to naphtha.

The CIF coaster market was assessed at $541/mt Tuesday, or 95% relative to naphtha, the lowest level since October 23, according to Platts data.

The barge market, which sees the bulk of the gasoline blending demand for butane on the spot market, was assessed at $555/mt, 97.5% on an FOB basis and 100% relative to naphtha on a CIF basis, the lowest level in three weeks.

"[It] seems like the blending has disappeared," said a source active on the CIF coaster market.

Another source active on the inland market said: "Blending is dead...people are sitting on their hands for the most part."

Blending has been said to be soft on the spot butane complex since the beginning of the blending season, with only enough demand to support the inland barge market.

Spot buyers typically prefer barges for blending, because the smaller volumes provide more flexibility and more specific dates, according to traders active in the region. That leaves the CIF coaster market with only additional demand.

This year, little of that demand has been heard, with CIF coasters instead relying on buying from petrochemical players, and relatively thin regional supply, for support.

However, support for both appeared to soften this week, as supply was said by sources to be sufficient following the return of Ineos's export terminal in Grangemouth, Scotland, and petchem buyers who were holding out for lower prices, according to a source.

"Once blending drops off, we have to drop back to mid-90%s for petchems. There is no middle ground really," said the second source active on the inland market.

That left the market waiting for the arbitrage for gasoline product to open up before blending demand can come back into the market, a source said.

"If the arbs are not there they lose money holding [butane] in tank," the source also said. "Better not to have it."

--Virginie Malicier,
--Katherine Dunn,
--Edited by Dan Lalor,