US Gulf coast exports to Mexico to rise
As many as 13 spot clean cargoes were seen booked from the US Gulf coast to Mexico over the past week, more than double the four-six cargoes seen the week prior.
US domestic gasoline demand, measured by the Energy Information Administration (EIA), fell to a three-year low at 8.04mn b/d.
A build in gasoline and distillates stocks on the US Atlantic coast also limited shipments to that region from the Gulf. The US Atlantic coast is currently being hit with a steady flow of gasoline cargoes from Europe. Gasoline inventories at Europe's Amsterdam-Rotterdam-Antwerp hub rose to a six-month high this week to 1.22mn t. No movements from Europe to Mexico were detected this week.
US Gulf coast refinery maintenance work cut utilization rates to 87.4pc last week, down from 92pc a week earlier.
The Argus Renewable Volume Obligation (RVO), which measures the cost of US refiners and blenders to adhere to US renewable fuel mandates, tumbled to a one-year low of 6.99?/USG. The drop came after President Donald Trump signed an executive memorandum delaying the review of 2017 biofuel blending mandates until 21 March.
A weaker RVO can remove some of the incentive US producers have to push product overseas. In addition, low RVO also reduces the incentive for refiners to maximize production of off-road fuels such as jet fuel and heating oil.
Prior to the RVO rally, Gulf coast refiners had scaled back ultra-low sulphur diesel production for four consecutive weeks, dropping by 20pc from 2016 year-end levels of 2.8mn b/d to 2.24mn b/d last week, according to data from the EIA.
While it remains to be seen whether blending mandates will be scaled back, biofuels market participants are anticipating continued volatility.
On the US west coast, Los Angeles gasoline lost its competitive edge to the US Gulf coast market seen earlier this month. Sub-octane grade in Los Angeles flipped to a 16.3?/USG premium over similar barrels on the Colonial pipeline on the Gulf coast, compared with a discount of 0.5?/USG at the beginning of the week. Upcoming maintenance at several Pacific Northwest refineries could curb west coast exports to Mexico as well.
There were no spot cargo bookings from the US west coast to Mexico. Instead, the Hafnia Lupus was seen booked from the Gulf coast to west coast Mexico. A fixture report showed three cargoes offloading at Mazanillo and Rosarito this week that originated from refineries in Washington state, compared with two originating in Texas.