European refining margins have recovered from their lows of last month, driven by a pick-up in products markets, especially jet fuel and gasoline, following run cuts throughout the region, according to traders.
"Demand for products seasonally should pick up, Q2 is a lull," said one trader Thursday.
The refining margin for Norwegian crude grade Ekofisk (basis Amsterdam-Rotterdam-Antwerp) has recovered from a low of $0.58/b on May 16, to $1.37/b at of Thursday night, according to Platts data.
The margin for Norway's Oseberg crude is up from $1.71/b on May 21, to $2.88/b Thursday night, while that of Russian sour grade Urals is up from $0.95/b on May 22 to $3.05/b Thursday night.
A rally in jet fuel premiums has reinvigorated the aviation fuel segment versus other transportation fuels. The jet FOB Rotterdam barge crack to Dated Brent was at $13.13/b Thursday, slightly down on the day, but at the top end of a monthly range.
Trade sources said July demand is seasonally higher and incrementally up year on year. But the main support has come from pockets of buying interest forced to bid higher to lure product out of tank after a period of contango market structure alleviated pressure on sellers.
The ultra low sulfur diesel Rotterdam barge crack to Dated Brent closed at $11.76/b on Thursday, lower on the day but still higher on the month following the run cuts and lower US and Russian arbitrage volumes expected over the July period.
However, diesel has continued to underperform gasoline and jet fuel on the back of continued strong exports over Q1 and Q2 this year from the US and the Baltics which have weighed heavily on cash premiums.
In gasoline, Eurobob cracks rallied Thursday as bullish sentiment triggered a steeper backwardation in the market. The balance-month June Eurobob crack swap was heard passing the $13/barrel mark, while the front-month crack swap was assessed at $11.75/b, up $0.15/b on the day, and its highest level in three weeks.
The market's backwardation steepened further, with the July/August spread assessed at $14/mt, up from $10.25/mt the previous day.
"Hearing that ARA tanks are pretty empty," said a gasoline trading source, referring to gasoline stock level concerns in the Amsterdam-Rotterdam-Antwerp region.
