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Traders have booked in recent weeks at least three tankers to store summer-grade gasoline off the coasts of the Netherlands as supplies in northwest Europe have steadily increased this year, pushing prices down, Reuters reports, citing trading sources and shipping data.
At the same time, European refining margins for gasoline have dropped, and as of March 9, the northwest European gasoline refining margins were US$1.67 per barrel, the lowest level since December 2014, as winter-grade gasoline prices plunged, Reuters calculations show.
Commodity and oil product trader Gunvor has booked three 90,000-ton tankers to store gasoline off the Dutch coasts for up to 60 days, trading sources told Reuters.
Gasoline stocks in the Amsterdam-Rotterdam-Antwerp refining and storage hub have swelled in recent weeks to their highest level since July 2016, according to estimates by Dutch market data provider PJK International, quoted by Reuters.
The decline in current gasoline prices has tipped the northwest European gasoline market into a contango, the market structure in which current-month prices are lower than prices further out in time and which indicates that supply is higher than demand, traders say.
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This market structure makes storing gasoline on tankers at sea for sale at a future point in time profitable for traders.
In addition, the freight rates for medium-range tankers have dropped and made booking the tankers cheaper, ship brokers told Reuters.
The gasoline stored off the European coast is reportedly summer-grade and it will likely be kept in floating storage until gasoline demand in the United States picks up later this year and the U.S. switches from winter to summer-grade gasoline on May 1, according to traders.
“Typically, imports of summer grade product rise from mid-March onwards, with the vast majority of product heading into the Atlantic Coast originating from Europe,” Alphatanker said in a note, as carried by Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.