Northwest European Gasoline Margins Surge to Near-2022 Highs on Tight Supply

Northwest European gasoline refining margins surged on Wednesday, approaching record levels last seen during the 2022 energy crisis, as tight supplies and low inventories continue to pressure the market. The key profitability metric for refineries increased by $3.79 to settle at $59.41 per barrel.

Market Drivers

The primary driver for the sharp increase in margins is a tightening supply-demand balance in the region. Low inventory levels have been a persistent issue, leaving the market vulnerable to price spikes. This rally signals strong profitability for refiners but may translate to higher costs for distributors and ultimately consumers.

Market analysts suggest the upward trend could continue. "In the short term, EBOB spreads may have further upside to go, particularly over the next two weeks... with inventories remaining tight," said Nikolas Plonski, an analyst at Sparta Commodities, in a note cited by Reuters.

Inventory Data and Trade Flow

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Supporting the narrative of a tightening global market, recent data points to inventory drawdowns and active trading.

• U.S. Inventories: The Energy Information Administration (EIA) reported that U.S. gasoline stocks fell by 1.2 million barrels to 205.7 million barrels last week. This was a smaller decline than the 1.8 million-barrel drop analysts had forecast but still indicates shrinking stockpiles.
• European Exports: Data from Kpler showed that gasoline and blending component exports from the EU-27 and the UK to other regions rose to an average of approximately 1.08 million barrels per day in August, up from about 1.02 million barrels per day in July, further constraining regional availability.

Trading activity in the physical barge market was robust, with about 11,000 metric tons of E5 gasoline and 6,000 metric tons of E10 gasoline changing hands. Major oil companies and trading houses, including Equinor, Exxon, Shell, Vitol, Varo, and Trafigura, were active participants, according to the report.