Plunging US Gulf Coast gasoline values are revealing open arbitrage flows to Canada and potentially West Africa.
"It sounds like the arb out of the Gulf Coast is opening up ... to everywhere," a Gulf Coast gasoline trading source said Wednesday. "I heard West Africa and Canada are open."
While the arb to the East Coast of Canada appears open, with three vessels booked for that route in the past 24 hours and freight rates moving up quickly, it is less certain whether barrels are poised to move to West Africa.
Several Gulf Coast gasoline traders have discussed the opening of the arb to West Africa, but a West Africa trading source says the arb remains "tight" with several hurdles for sellers to overcome.
"I see a cargo of gasoline being offered [into Nigeria] from the Gulf Coast, but I think people would think twice about it," a London-based West Africa gasoline trading source said.
The proposed delivery date for the Gulf Coast cargo is December 20-25, and Nigerian buyers might look to receive a discount of an additional few cents/gal to take delivery of gasoline during the Christmas holiday, which is typically problematic for unloading vessels, the source said.
Credit concerns with Nigeria persist, the source added, which could further complicate a deal between US Gulf Coast sellers and Nigerian buyers. The Gulf Coast gasoline arb to Canada, however, appears to be be more viable.
On Tuesday, ExxonMobil placed the Eagle Madrid on subjects for a USGC-Dartmouth voyage loading November 18-20 at Worldscale 130. Following that, Valero placed the Ardmore Sealifter on subjects for a November 18-20 USGC loading voyage with a trans Atlantic discharge option at w80 and an East Coast Canada option at w135.
Shipping sources also said Wednesday that Mercuria has placed the Sea Horizon on subjects for a USGC-East Coast Canada voyage loading around November 21-22 at w150.
One shipbroker said that the vessels would likely be carrying gasoline, as that is typically the product that moves on those voyages.
Gulf Coast cash gasoline values have been declining this week on the back of expectations of increased supply from regional refineries returning from turnaround and unplanned maintenance.
The Gulf Coast RBOB flat price Tuesday dropped 4.37 cents from Monday to be assessed at $1.2718/gal while CBOB saw a similar fate, dropping 5.62 cents from Monday to $1.2318/gal.
The weakness in gasoline differentials continued Wednesday morning, with CBOB seen changing hands at the NYMEX December RBOB futures contract minus 13.75 cents/gal.
