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The recent drop in US refinery throughput following the North American winter storm has strengthened transatlantic gasoline flows, while exerting pressure on Medium Range (MR) tankers operating in the Americas. But looking forward, the tables could be turned.
Crude processing by US refineries during the last week of February fell to lows last seen in 1982 according to EIA. Meanwhile, domestic gasoline demand has increased in the aftermath of the February ice storm, pushing refining margins to levels last seen when hurricane Harvey hit the US shores in September 2017. The 3-2-1 crack spread against WTI Houston - a proxy for US refineries' total refining margins - crude averaged $16.80/bbl for the week ending March 5, according to Argus Media, up by 42% from the first week of February.
Depressed crude processing activity in PADD 3 has on one hand weighed on the region's gasoline exports, and on the other hand boosted PADD 1 and PADD 3 gasoline imports, our data show.
Weak PADD 3 exports to Latin America pressures rates downwards
Gasoline/blending components departures from USGC to Latin America in February thinned on a m-o-m basis by 40%. The limited supply, however, is only one part of the equation. For countries such as Mexico, historically the largest importer of US gasoline, ailing demand for refined products has exacerbated the decline in flows.
As a result, utilisation for tankers - predominantly MRs - carrying gasoline from PADD 3 to Latin America has been declining steadily since the start of the year. The trend has continued in March, as utilisation fellby 15% w-o-w for the week ending on March 7.
The drop in cargo volumes across this route has added downward pressure on the freight market, which for the USGC – North Brazil route has dropped by 10% from the start of February to March 8, according to Argus Media. But as Texas refineries are gradually coming back online and supply normalises, an uptick on gasoline flows out of PADD 3 and, freight rates, is expected.