European Gasoline Overview
Europe and Asia have both seen historical highs for gasoline prices in 2004. Below are summaries of the key prices movements, and the market reactions that followed.
European Gasoline Overview
On April 27 2004 European PU 10ppm gasoline prices rose to a record $408/mt which was the highest level since Platts began tracking the prices in October 2002. Gasoline prices had been on a virtual uninterrupted run-up since January when they began the year at around 275 and had risen buoyed by US demand and overall high prices across the Atlantic. This spike was sparked by rising crude prices and an environmental protection ruling in the US tightening sulphur content. The previous $400/mt barrier for other grades of gasoline was last broken on June 26, 2000.
Traders reported that European premium unleaded gasoline barge prices rose $4.25 /mt to $415.25/mt on continuing US demand and the strength of crude on Apr 28. The European market was then buoyed by comments from US Federal Reserve Chairman Alan Greenspan that US businesses would put more emphasis on long-term energy price movements when making investment decisions. Speculation on OPECs future price band policy then further boosted demand.
European gasoline prices soared as much as $13/mt to $456 on May 4, after the May Day holiday compared with $443 on Apr 30, as supply tightened in the Amsterdam/Rotterdam barges market and Brent crude futures rose to 14-year highs. The price rise was accelerated by the surge in US gasoline futures on concern about stock builds and possible supply disruptions from the Middle East before the annual driving season in the world's biggest gasoline market that runs from the weekend beginning May 28 until early September.
Two days later on May 6, European gasoline prices hit a record $464/mt in trading on strong demand in a tight market, with traders eyeing the Nymex June unleaded contract that had risen that week at three times the pace as the increase in crude oil prices. Gasoline maintained its strength even after the US Department of Energy reported a 4-mil bbl build in stocks ahead of the peak driving season.
Prices for European Gasoline dropped $22.50/mt on May 11 as the NYMEX June unleaded and Brent crude futures prices continued to drift down on the prospects of Saudi Arabia and other OPEC countries pumping more oil to boost supply and ease prices.
The drop in price was short lived as, due to the US reporting a draw on gasoline stocks and the NYMEX June crude contract trading for a third day above $40/bbl after setting an all-time high, European gasoline prices jumped $10/mt on May 13 to a record $468/mt . When gasoline prices reached the historic high of $470/mt on May 17, the crack on that deal was also $17.50/bbl compared with record cracks of more than $19/bbl over the first two weeks of May when crude was trading lower. Traders said at the time that the high cracks would last longer and be at a more consistent figure once the crude price gathered strength, which is exactly what transpired.
The general slump that occurred from May 19 was attributed by European traders to falling prices across the complex, lower demand for gasoline barges from Germany and an expected rise in US gasoline stocks.
Record levels of European gasoline cargoes headed for New York Harbor in the two weeks following May 27 as refiners and traders took advantage of a pause in gasoline price rises in Europe to work the Atlantic arbitrage window for maximum profit. Traders at this point asserted that prices stayed lower due to lack of concern about gasoline supplies coming into New York Harbor, the price of which the NYMEX unleaded futures contract is based on. Traders also mentioned that OPEC's pledge about pumping more crude had been priced into the market in this period. Following the thin trading on May 27, as traders held off due to volatile prices in the US, European gasoline barge prices were pushed up May 28 after a buying spree by Swiss-based oil traders Vitol at prices from $422/mt to $425/mt ended three straight days of falls.
Until June 1, gasoline prices then fell because of increased supplies in Europe and the US. The value of physical gasoline against Brent crude , the crack to Brent, has also fallen in that week from about $17.0/$17.5/bbl on May 24 to $14.00/14.40/bbl. However, attacks on foreign workers in Saudi Arabia sent July Brent crude futures and WTI July crude up more than $1.50/bbl on concern about supplies, and European gasolineup by $13/mt.
On Jun 4 European sulfur-free gasoline barge prices settled below the psychologically important $400/mt level for the first time in six weeks as crude oil futures dropped on OPEC pledges of more production and US stock builds. Prospects of a record 2 million/mt of European gasoline exports to the US in June evaporated in the following week after falling prices on the New York Mercantile Exchange made selling transatlantic less attractive for traders. Benchmark unleaded gasoline barge prices in Europe had plunged almost $100/mt since May 17 to trade June 9 at $372/mt for a 1,000-tonne barge, loading Amsterdam/Rotterdam on June 11-17. Highlighting the fall in gasoline prices in Europe was the value of physical gasoline against Brent crude, or the gasoline crack spread. The gasoline crack, a measure of profitability for refiners, dropped below the $10/bbl mark on June 7 for the first time in more than two and a half months as falling US prices coincided with waning European demand from countries such as Germany.
European sulphur-free gasoline barge prices then surged $17/mt on June 18
above the important $400/mt mark for the first time in two weeks after the US
unleaded gasoline contract rallied and held its ground on June 17. Several
factors had pushed the US higher, including reported problems at an ExxonMobil
refinery in Baytown, Texas, continued concern over Middle East crude supply and
perceived tightness in the gasoline market on the East Coast of the US. European
gasoline traders added these factors to their own mix of views; "We're
seeing the first signs in recent weeks that the price falls are over-cooked and
no one wants to be without gasoline now during peak summer demand,"
commented one trader.
Copyright © 2004 - Platts
Please visit: www.platts.com
Their coverage of energy matters is extensive!!.