Outright European gasoline prices surged on the back of rallying crude prices to fresh 10-month highs Thursday, as cracks remained broadly supported throughout the day on concerns about future supply, traders said.
On Thursday, the FOB Rotterdam Eurobob gasoline barge price climbed $25/mt from Wednesday's close to be valued at $1,122.50/mt, while the FOB Rotterdam 10 ppm gasoline barge price gained $27/mt to be assessed at $1,144/mt.
Both markets are at highs not seen since May 10, 2011, Platts data shows, when EBOB barges were assessed at $1,136/mt and 10 ppm barges were valued at $1,145/mt.
The front-month ICE Brent contract jumped $3.29/b compared with its 1630 GMT Wednesday mark to trade at $126.25/b at 1630 Thursday, as concerns about future crude supplies and market optimism about Greek debt boosted prices.
While high crude prices are the primary driver behind the price jump, traders said, the European gasoline market is unseasonally strong as recent refinery closures in both Europe and the US and the possibility of further cuts to refining margins stoke bullish sentiment in the market.
The balance-month FOB Rotterdam EBOB crack swap, which measures the price performance of EBOB barges versus Brent crude, fell 5 cents/b on Thursday to close at $8.90/b, despite the sharp uptick in crude values.
"Margins still aren't great, and refineries still have the option to cut [runs] to [strengthen] cracks," a gasoline trader said. "If middle distillates keep falling, something needs to keep the margins up, or refineries would just stop entirely. Bearish distillates is bullish gasoline."
Traders said that while overall global demand for gasoline remains muted, recent refinery closures and the possibility of additional run cuts on high crude prices is helping to bolster cracks.
"The tricky thing is that demand isn't great to begin with, particularly in the US and Europe," another trader said of the strong cracks. "But emerging markets and refinery closures seem to be propping up cracks. If we get run cuts, despite weak demand, [cracks] could stay up."
