Gasoline Markets See Late Summer Strength as Outages Limit Supplies

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(Bloomberg) — Global gasoline markets are showing unusual late-summer strength as refinery outages limit supply, even at a time of year when demand for the road fuel usually wanes.

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Refiners tend to make the most money in gasoline in the summer, especially in the US, as drivers take to the road for vacations. This year, margins are still strong even after the peak travel season, providing a boon for fuel makers.

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A barrel of gasoline is trading at a roughly $20.50 premium to an equivalent amount of West Texas Intermediate crude, up about $7 from the same time last year. That key measure of refiners’ profitability and gasoline-market strength has been rising since the US Labor Day holiday that marked the end of the peak driving season in early September.

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“The global gasoline complex is enjoying a period of unusual support for September,” said Ines Goncalves, Kpler’s lead gasoline research analyst. Profits from turning crude into gasoline in the West reached their highest level this year in early September rather than in the peak demand months between May and August, Goncalves said. 

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Unplanned outages in Europe, West Africa and the Middle East between September and November are likely causing the gasoline market strength in the Atlantic basin, said Pamela Munger, Vortexa’s EMEA head of market analysis. But refiners also shifted yields, curtailing gasoline output to take advantage of a spike in the profitability of diesel, she said.

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“The recent uptick in gasoline margins is a reflection of how sensitive prolonged supply outages can be even to an oversupplied market,” she said in a research note. 

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In northwest Europe, gasoline’s premium to crude is exceptionally strong for this time of year, according to figures from General Index.

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Along with multiple refinery closures, Europe is contending with plant maintenance — some planned, some not — as well as reported ongoing disruption to a key gasoline-unit at the giant Dangote refinery in Nigeria.

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At the same time, OECD Europe’s gasoline demand — supported by a shift away from diesel-fueled cars — has outpaced the five-year seasonal average every month so far this year, according to OilX data.

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“While seasonally demand is coming off in September, refinery maintenance is ramping up globally, with hefty works in Europe and in the Middle East,” said Natalia Losada, an analyst at Energy Aspects. “Middle Eastern markets have been very strong all summer, providing an outlet for European barrels.”

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In Asia, a key measure of refiner profits from making gasoline — the RON-92 crack — is trading above the five-year average. Multiple outages at refineries’ large gasoline-making units are tightening Asian markets, according to traders.