Gasoline complex still feels complacent, drawing inventories to keep prompt markets well supplied

Yesterday closed with RBBR cracks rising on another tick lower on flat price, but as noted on Monday, the wider gasoline complex appears to remain relatively immune to much of the ping-pong seen elsewhere in the market.

The Atlantic Basin does indeed remain well-supplied, and the call to pull barrels East quickly appears to be resulting in sporadic flows rather than a structurally relevant and rapid draining of ARA or US inventories.

The notable outlier today is gas-nap, which has moved higher on a de-risking in naphtha as the market appears to believe SoH flows will return sooner-than-later.

This has been contrary to the downside risk flagged on Monday, and looks less like gasoline strength and more like naphtha weakness.

The Nap NWE crack fell alongside flat-price, in a sign that at least some part of the market is pricing relatively less tightness in naphtha on the headline news.

If naphtha is being repriced lower on any assumption that flows will resume and/or the pull on Atlantic Basin naphtha into the East will diminish, then gas-nap remains a spread to watch for downside potential.

The E/W has come off — May E/W gas at $0.65/bbl having been $3.80 last Friday and $1.70 yesterday.

Even at these levels, and despite a higher gas-nap, ARA-origin arbs remain workable on paper into Africa and the Middle East.

We also have now options into LatAm and Canada supporting ARA as the cheapest source and potentially offering an additional outlet – at least until TC14 corrects lower again.

Sing92 continues to sell off regardless of the geopolitical backdrop — May Sing92 crk at $25.05/bbl (from $27.20 last Friday), with Singapore weekly inventories higher y-o-y for now and news of Chinese refiners tapping SPR and increasing clean product yields.

These should remain of relatively minor importance to the prompt regional supply picture with Chinese exports curbed, and Singapore inventories may not be the best barometer of the regional supply picture.

Demand destruction in the region may be playing a significant role already, with areas seeing supply shortages reducing demand to make existing inventories last longer rather than keeping up typical import volumes.

The full impact of reduced runs across Asia is likely to really start being felt towards the end of this month and into May, however, so the risk here seems naturally skewed to the upside – especially now that flows in from Europe are less attractive and certainly not able to hit the Pricing Centre in Singapore.

Finally, the US inventory picture is not providing a catalyst either way. US gasoline stocks came in at 240.9mb last week — only a 0.6mb draw against expectations of nearly 1.9mb, and still 4% above the five-year average.

Until those draws accelerate and the Atlantic Basin buffer starts to erode, it is difficult to see what forces gasoline cracks to finally reprice to match the crude complex.

USGC export econs have been strong for a while now, but they need to turn into actual, sustained flows before the Atlantic Basin starts pricing higher.