TC14 strength continues to distort Atlantic Basin gasoline picture

Commentary summary:

• Very strong prompt TC14 has closed all arbs out of the USGC and looks unsustainable, but may well have legs until traders return to their desks next week

• Jul/Aug EBOB spreads ended June on a downtick thanks to some prompt supply into the window.

• Components markets are yet to respond materially to blending/export activity in ARA, and low TC2, TA Arb (net-RVO), and narrow E/W are keeping ARA export opportunities open.

• Indeed, the TC14/TC2 spread is probably the largest single driver of gasoline arb econs in the Atlantic Basin. Given that these could both well turn around in the next 7-10 days, any upside bets on the TA Arb should be weighed carefully against the likely freight correction.

• Still-open blend margins and closed arbs to WAF are still providing some upside restrictions, with WAF cargoes heading East (and potentially some alkylate moving TA in the coming weeks) pointing to weak WAF blending/export requirements in ARA.

ARA’s advantage in the Atlantic Basin is still largely built on the TC2 vs TC14 spread. We would assume that this has another week or so at least left to run, but TC2 could start to see some support sooner rather than later, with increased blend demand looking to support the ARA mogas market.

Philip Jones-Lux is Senior Analyst for Sparta. Having worked with organisations such as JBC Energy and RP Global, Philip is a seasoned energy market analyst with expertise across the oil barrel and power markets

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