European glut weighs on global gasoline margins
- European gasoline stocks hit record high in January
- S. gasoline imports from Europe fell 18% in December
- Nigeria's Q4 2024 gasoline imports from Europe down 29%
Gasoline stocks in Europe have hit a record high as exports dropped due to higher refinery runs in the U.S. and Nigeria, resulting in gasoline profit margins at European and U.S. oil refineries falling to a 15-month low in January.
Gasoline margins typically drop in winter because of lower seasonal demand, but the depth of the decline is a blow to refiners as they face low margins for petrochemicals. Diesel is providing overall margins with some respite.
This short-term challenge adds to structural issues facing European refineries because of poor performance and tighter green regulations. In Europe, dozens of refineries have closed in the past 20 years, and more are expected to shut.
Gasoline exports have been a mainstay for some European refiners as Europe is a net exporter of the road fuel, but the startup of the Dangote refinery in Nigeria last year has reduced demand for fuel imports from Europe.
As a result, gasoline stocks in Europe’s main trading and refining hub - Amsterdam-Rotterdam-Antwerp, or ARA - hit record highs of 1.54 MM tonnes in January.
European gasoline exports dropped 9% year-on-year in the fourth quarter to 1.07 MMbpd, mainly because of lower shipments to Nigeria and the U.S., data from analytics firm Kpler showed.
Nigeria’s gasoline imports from Europe fell by 29% on the year to 146,000 bpd in the fourth quarter of last year, the lowest volume for that period, according to Kpler, which has data since 2017.
U.S. gasoline imports from Europe fell about 18% year-over-year to 240,000 bpd in December, its data showed.
Margins fall. ARA gasoline profit margins slipped to $4.25 a barrel on Jan. 15, the smallest since October 2023, according to LSEG data.
European gasoline margins' January 2025 average of $6 a barrel is the lowest value for the period since 2019, when European gasoline refining margins averaged minus $2.21, the data showed.
Patrick De Haan, analyst at U.S. fuel market tracker GasBuddy.com, said European gasoline exports to the U.S. have been slow due to strong U.S. refining output and higher shipments from the U.S. Gulf Coast refining hub to major cities on the East Coast.
U.S. refinery production of finished motor gasoline stood at 9.28 MMbbl in the week ended Jan. 10, 6% higher than the five-year seasonal average, according to the Energy Information Administration.
LSEG data showed U.S. gasoline margins narrowed to a 15-month low of $9.39 a barrel on Jan. 13, while their January 2025 average of $11 a barrel is the lowest since 2020.
A well-supplied market in Europe and the U.S. also weighed on gasoline refining margins in Asia, which narrowed to a three-month low of $3.92 a barrel on Jan. 20, according to LSEG data.
European exports could pick up in the coming months as U.S. refiners are set to undergo maintenance in spring, two U.S.-based gasoline traders said. They asked not to be named as they are not allowed to speak to media.
As stocks built up in Europe, the European gasoline market has moved into contango, a price structure in which prompt supply costs less than fuel for delivery later. This structure typically makes it profitable to hold onto stocks and sell it at profit later.
"Market structure... is now paying quite nicely to simply store barrels in ARA and wait for maintenance to kick in and the demand pick-up to start releasing those volumes again," said Sparta Commodities analyst Philip Jones-Lux.
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