Will seaborne USAC gasoline import strength continue?

North America East Coast (PADD 1, PADD 3 and the Caribbean) gasoline imports are up 15% m-o-m for June (days 1-20). PADD 1 is the dominant driver for the import demand which will likely last until the first half of July when seasonal declines kick in until the next driving demand season picks up from Thanksgiving holiday onwards. Overall PADD 1 demand is widely expected to be higher this year than 2022 but not back to pre-pandemic levels due to changes in transportation patterns. And although PADD 1 stocks have been building in the past few weeks with stock levels nearly 5% higher than 2022, unplanned gasoline production unit (FCC) outages in PADD 1 and USGC could support flows in the second half of July.

 Gasoline imports into North America East Coast (incl. Gulf Coast and Caribbean) (mbd)

While over 60% of the June gasoline/blending component imports into PADD 1 have originated from Europe (mainly ARA), we have seen an increase in blending components from India (up 35% m-o-m) and redistributed supplies from the Caribbean (up 40% m-o-m). Meanwhile, gasoline flows into the Caribbean have been up by 25% Jan-June 2023 compared to Jan-June 2022 suggesting it is a growing outlet for excess gasoline supplies in the Atlantic Basin and could serve an increasingly important role in supplying short gasoline markets due to its proximity to PADD 1, LatAm, and West Africa.

ARA hub replaces Russia naphtha for blending

Now taking a look at Europe, the largest supplier of gasoline to PADD 1 and a growing supplier to LatAm markets we see that the coveted naphtha stream from Russia (averaging 450kbd in 2022) has disappeared in line with EU sanctions. We see that although total import volumes have not recovered, it looks as if sufficient volumes are coming in for gasoline blending operations especially from Algeria, Spain, and the US.

 European naphtha imports by origin region (kbd, LHS) and percentage share from Algeria (%, RHS)

Gasoline reshuffling in an oversupplied market

After the demand pull in PADD 1 subsides, there will likely be excess gasoline on the market again as Europe loses the principal home for its barrels and looks again toward LatAm for buyers, possibly backing out Asian gasoline imports into LatAm. 

West Africa might not serve as a helpful outlet for Europe, especially Angola and Nigeria. We have already seen a declining trend in gasoline imports to the region since February and the recent announcement of gasoline subsidy removals will likely accelerate the lower consumption. Since WAF has been taking rising portions of gasoline from Russia (since March) and Middle East (May and June) the pain most likely will not only be felt in the European market but also globally.