Northwest European gasoline refining margins dropped sharply on Wednesday, falling by more than $28 to $8.38 a barrel, a level not seen since October. The decline came as crude oil futures moved higher, adding pressure on the spread between refined product values and crude input costs.
In trading activity reported for the period, Shell sold one Eurobob E5 cargo to Gunvor in the Argus window. Separately, roughly 12,000 metric tons of Eurobob E10 changed hands, with Exxon and Unipec recorded as sellers and Varo, BP and Trafigura as buyers.
Market participants have been asking which refining-related instruments have moved with Northwest European gasoline margins, and what market signals could point to a recovery in gasoline margins. Those questions point to the interplay between physical cargo flows, refinery economics and broader crude market direction.
Oil moved higher on the day, which increased cost pressure for refined products. By 1738 GMT on Wednesday, benchmark crude was trading up 1.5% at $92.87 a barrel. The rise followed comments from Iran's security chief that Tehran would not allow any enriched nuclear material to leave the country. Earlier in the week, prices had touched a two-month low at $89.16 a barrel in the previous session.
Attention to inventory data also featured in market moves. An extended poll published on Tuesday indicated that US crude oil and product stockpiles were expected to have fallen last week. The same survey projected gasoline stockpiles to have decreased by about 100,000 barrels. Expectations of draws in US inventories can support product and crude prices, even as regional refining margins fluctuate.
The combination of a marked drop in regional gasoline margins, active Eurobob cargo trades, a rise in crude prices after geopolitical-linked comments, and anticipated inventory draws in the United States framed the market narrative for the session. How refining margins respond in coming sessions will depend on the balance of cargo flows, refinery runs and subsequent movements in international crude markets.