Gasoline cracks and spreads settling in for a more realistic winter following an explosive summer
The global gasoline complex reversed its stark falls from the week prior and appears to have found a floor. Although pressure was apparent first in Europe, the selloff spread quickly, and the Asian market in particular is yet to show signs of rebounding. Lower cracks and spreads in Asia in particular are likely to have an impact on product availability in the region through Q4, with Chinese exporters likely to dial back volumes under less favourable conditions.
Apparently not immune from the stronger than usual seasonal downturn in gasoline cracks in the Atlantic basin, also Singapore markets have taken a turn for the worse recently, compounded by resent plentiful outflows from China and a return to service after maintenance from some major exporting facilities across the continent. The current market serves as a reminder that the physical market cannot and will not provide the answers to every price move, with financial players and herd mentality sometimes moving the market strongly in the short term.
However, eventually both refiners and traders need to be given adequate pricing signals to fill real world physical gaps, and for now that will likely mean keeping backwardation near current highs and not allowing the gas-nap spread to narrow significantly.