Gasoline remaining largely immune to geopolitical ping-pong
‘- Atlantic Basin gasoline cracks are essentially back to where they were pre-ceasefire news, although they were also largely unmoved by that headline in the first place. There is some bullish impetus perhaps, and the TA Arb is coming off slightly, but it still feels as though there is complacency in certain parts of the gasoline complex.
– An uptick in some USGC component prices in particular has driven ARA to be the cheapest source of supply again into Canada, Brazil, and Guatemala. It is being helped by a relatively wide May gas-nap, which remains stubbornly around the $140/mt mark for now but has some significant downside risk given the relative dynamics between gasoline and naphtha.
– Sing92 has actually sold off somewhat this morning, because we don’t always need to understand this market 6-7 weeks into the SoH closure. Similarly to the picture in Europe, the May Sing92/MOPJ spreads are markedly wider than April levels, and have yet to react to the latest confirmation of continued SoH closure.
– Overall, whilst gasoline is historically relatively price inelastic, demand is certainly policy-elastic – meaning government demand reduction measures can/will target gasoline more directly than distillates. Governments looking to shield the broader economy from fuel shortages and high prices will find it easier to curb gasoline consumption, whilst both diesel and naphtha consumption are arguably greater drivers of broader economic activity.
– For now at least – until the full impact of the expected crude run cuts in Asia is felt – narrower gas-nap and Sing92/MOPJ spreads feel justified, as do wider mogas-diesel spreads so long as Atlantic Basin inventories remain healthy. An acceleration of those drawdowns, and increasing seasonal demand, are likely to require both price and policy responses as we move deeper into Q2.
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