As Europeans drive less, the price they pay for gasoline for their engines rises as the continent’s refineries increase exports but produce less fuel.
The so-called “crack spread” – the price at which gasoline is sold relative to crude oil – hit its all-season high since 2017 in early April. This helped drive retail prices to their highest levels in recent years on a seasonal basis in several of the continent’s major consumer countries, including Germany, France and Italy.
At least a quarter of petrol units at refineries in northwest Europe have recently been shut down for maintenance or suffered an unplanned outage. This further reduces production at a time when refineries are still processing less crude due to the pandemic. Add to that healthy exports, especially to the US, and prices suggest the market is more than making up for lost demand.
“European gasoline has a huge impact on other key regions,” said Mark Williams, oil analyst at Wood Mackenzie Ltd., adding that resurgent US demand is driving the European market.
When the spring restrictions came into effect in Europe last year, the need for millions of barrels of gasoline disappeared and refining profits disappeared. plunged deep into negative territory… This has not happened this time, despite the latest wave of mobility restrictions across the continent, limiting road use and keeping two other key transportation fuels weak: diesel and jet fuels.
European gasoline exports to the US in March rose more than 60% from the previous month and will remain strong in April, according to analyst firm Kpler. Shipments to West Africa are also good, averaging nearly half a million barrels per day in the first quarter of this year. Nigeria also recently announced that it will not give up gasoline. subsidies.
At the same time, Europe’s own supplies are curtailed by the shutdown of several gasoline production units called liquid catalytic cracking units.
Germany’s Miro refinery, which typically supplies a quarter to a third of the country’s gasoline, underwent a major overhaul this spring. The Pembroke plant in the UK is also among the refineries that have cut supplies in recent weeks.
“These outages are most likely not economically motivated, but rather the result of planning,” said Cohen Wessels, an analyst at Energy Aspect, noting that declining production has supported profitability.
Refinery disruptions and high export volumes helped bolster the gasoline market in Europe, even as road use across the continent fell to its lowest level this year in the week to March 28, according to traffic data compiled by Bloomberg. On average, it has dropped by about 30% from pre-pandemic levels.
While these forces help gasoline, they are not enough to bring margins on other key transportation fuels back to seasonal levels. With air traffic in Europe still more than 60% below pre-pandemic levels, refiners are still converting aviation kerosene production to diesel, increasing supplies and lowering prices.
“The fundamentals are tougher on gasoline,” Williams said. “That won’t change until the demand for jet aircraft improves.”
– Assisted by Alex Longley