Strong pricing, weak flows, gasoline yet to follow the barrel

Commentary summary:

• USGC showing the clearest response, with firming component diffs and rising loadings

• ARA response remains slow, with component premiums drifting lower.

• Possible constraints include logistics, backwardation and uncertainty on disruption duration.

• Distillates and naphtha markets showing greater urgency than gasoline, but the worst could be yet to come with summer arrival.

The gasoline market, despite the ongoing strength, continues to lag the broader barrel in reacting to the disruption in the AG, with pricing movements still not materialising fully into the physical market.

Since the closure of the Strait of Hormuz, pricing has adjusted first where it was most needed, mainly through E/W arb expansions and product spreads.

This has created a clear economic signal to move barrels East, particularly from the Atlantic Basin into Africa, the Middle East and APAC. On paper, gasoline should already be flowing in size from both ARA and USGC towards the East of Suez.

( E/W gasoline keeps showing a big incentive to move more barrels from West to East)

However, flows have yet to respond meaningfully. Fixtures remain limited and vessel tracking does not show a significant increase in gasoline moving East.

ARA in particular appears slow to react, with component premiums drifting lower, suggesting that blending and export activity has not yet accelerated. This could reflect a mix of logistical constraints, strong backwardation, or uncertainty around the duration of the disruption.

(Current landing prices support and increasing flow from ARA and USGC to eastern outlets)

In contrast, the USGC is showing a clearer response. Component differentials have been firming, supported by a narrower TA arb and healthy CBOB RBOB structure, reinforcing its position as the cheapest marginal supplier into both the Atlantic Basin and further afield, including Australia.

Physical loadings out of the USGC are picking up, indicating that the US is currently acting as the primary balancing point.

On products, the stress is more visible in distillates, where extreme pricing in Asia and Europe is already triggering early signs of demand destruction.

Gasoline has not yet reached that point, but the scramble for replacement barrels is clearly underway, particularly into Australia, where USGC cargoes are increasingly being directed.

Despite gas-nap levels being higher than at the start of the conflict, the shift in naphtha arbitrages has been substantial due to the heavy dependence of the Asian petrochemical industry on naphtha imports.

For now, gasoline flows remain more stable than in middle distillates and naphtha markets, which are showing greater urgency to attract more barrels from the West than gasoline. However, the gasoline market situation could become more pronounced with the arrival of summer if the Iranian conflict extends for several more weeks or even months.

(Despite gas-nap spread is widening, the impact on fixtures is still higher on the naphtha market)

Overall, gasoline remains in a transitional phase. The arb signal is strong, but physical flows have not yet fully responded, particularly out of ARA.

Until we see a clear pickup in blending and fixtures to move light ends East, European pricing is likely to remain relatively contained.