The front-month Northwest European Eurobob gasoline crack spread--the price difference between gasoline and crude oil--has moved into negative territory for the first time due to a combination of winter sentiment and higher crude prices, sources said Thursday.
Firm middle distillate cracks have also put pressure on gasoline cracks.
The front-month Eurobob gasoline crack spread was assessed at minus 20 cents/barrel Wednesday, down from plus 40 cents/b Tuesday and down from plus $1.55/b on November 1, Platts data show.
The front-month Eurobob gasoline crack spread was assessed at plus $2.30/b at the same time last year, on November 9, 2010.
Gasoline is a seasonal product and typically peaks in value during the summer and eases during the winter season. Traders said this week that weaker cracks demonstrated the seasonal effect.
"The reason for the big swing in gasoline is mostly sentiment," a Switzerland-based trader said Thursday.
Traders also attributed the sharp fall in crack spreads to a rise in Brent crude prices, affecting the spread between feedstock crude and refined products.
The December ICE Brent crude futures contract is currently trading at $113/barrel, up from Friday's close of $111.7/b.
In addition, refiners in Europe are focusing on middle distillate production, which can put pressure on gasoline cracks as one product takes precedence over another.
"Distillate prices are supported by hedging," one trader said Thursday.
However, while gasoline values have fallen on a crack basis, market stocks remain low, sources said, and gasoline has maintained a backwardated structure.
A backwardated structure is one in which a product loses value going forward, so holds more value on prompter dates.
"Do remember the market is still backwardated. Stocks are still very low," a trader said Thursday.
