The US may be importing Christmas toys, iPads and “Gangnam Style” from Asia. But the US is sending a rare gift to Asia over the holidays: gasoline.
At least four cargoes carrying more than 1 million barrels–enough to fill up your SUV tank 2 million times–have moved recently from the US to Asia in a “reverse arbitrage.”
The cargoes were moving from the Pacific Northwest and US Gulf Coast in December to Singapore and Australia,shipped by BP (two cargoes), Noble and Shell, sources said. Traders at those companies declined comment.
Trading and shipping sources said additional cargo fixtures were likely for a window that may stay open through the winter.
Such movement “rarely makes sense,” said consultant Andy Lipow of Lipow Oil Associates. But he noted the US refining industry is using a record amount of its capacity for this time of year, especially in the Midwest and US Gulf Coast, and needs to send the excess somewhere. US Energy Information Administration data released Wednesday put the US-wide refinery run rate at 91.5%, but a peak 96.5% for the Gulf Coast and 95.9% for the Midwest. The US West Coast was only at 79.8%, but had above-average stocks of 32.64 million barrels.
Lipow echoed what several sources said was a likely continuation of Asian-bound gasoline cargoes into 2013. He noted pipeline space is mostly full for movement to key East Coast markets, while US-to-US port movements require hard-to-find and costly US-flagged Jones Act ships.
“Into the winter season, the domestic demand falls and inventories have risen substantially over the last month,” he said. “Clearly until we move into the spring and summer and domestic demand rises, the exports will continue.”
A West Coast trader said Mexico usually draws excess gasoline, but may have bought too much already and slowed down or even turned away those cargoes. “The Pacific Northwest to Singapore? It raised some eyebrows here. It doesn’t happen,” he said. “But if Mexico is not taking as much right now, you send it where you can.”
The US is exporting near-record amounts of diesel and switched to a net exporter of jet fuel in recent years. But gasoline? That’s a mainstay for the US driving culture. Gasoline has always bobbed more toward US shores than away from it.
Gasoline blendstocks that need further finishing before reaching the pump hit a record 31 million barrels of imports in May 2011, EIA data showed. It was mostly from Europe, but Singapore, India, South Korea, China, Taiwan and Japan have been solid contributors to that flow.
EIA data, meanwhile, showed a record 19 million barrels in exports of finished gasoline in December 2011. More typical monthly levels were at half that in the last three years. That’s a break from the past, but a gain largely fueled by one country–Mexico–and not Asia.
Taiwan imported from the US the equivalent of three 250,000- to 300,000-barrel gasoline cargoes in March 2012, but no others dating back to 1998. Japan had two in March, one in December 2011 and then nothing back to 2001. China had only two since 2001: 2008 and 2011. Singapore had only two since 2006, one in December 2011 and one in February 2012. Vietnam’s last US cargo was in 2005, Australia’s and New Zealand’s in 2004, Hong Kong’s in 2003, South Korea’s in 1994 and the Philippines’’ in 1993.
“It’s definitely an odd route,” a second shipping source said. “Something’s gotta be out of whack for that arb to open.” The outright numbers do show an opportunity, before freight or other factors. On December 18, Platts assessed Singapore 92 RON gasoline, (the Platts-based MOPS assessment), at approximately $2.72/gal. The Los Angeles CARBOB price that day was about $2.60/gal.
Typically USWC gasoline trades at a premium to Singapore and, even when a discount structure emerges, freight costs effectively block movements to Asia. US prices, however, fell sharply in late November compared to Asia, opening up the arbitrage even after freight costs.
The trend may pop open more often even if the US economy picks up. More people driving doesn’t necessarily mean more gasoline is needed. “Go outside and count the Priuses and small cars,” a second West Coast trader said. Many of those gas-sippers, of course, come from Asia.