Germany sees lowest summer gasoline prices in 7 years

OREANDA-NEWS. July 22, 2016. German gasoline prices are at the lowest for this time of year for seven years, because of a combination of high domestic refinery output and weak US demand, but this is unlikely to increase demand from German consumers.

German refinery output of motor gasoline was up by 6pc in January-May, compared with the same period last year, according to industry association MWV. This was mainly at the expense of heating oil production, which dropped by 6.5pc. Germany is structurally long gasoline and exported 66,300 b/d of the product in June-August 2015. But with gasoline stocks at or close to record highs in the Amsterdam-Rotterdam-Antwerp (ARA) hub and in the US, Germany is likely to export less this summer.

While US gasoline demand is strong, thanks in part to retail prices being at their lowest summer level since 2004, Germany historically does not have a similar correlation. This is partly because of the high proportion of tax — at the current retail price, tax accounts for around 65pc of the cost of gasoline at German pumps.

So demand in Germany is not likely to contribute much to reducing the gasoline oversupply in the Atlantic basin, and European gasoline cracks will remain under pressure.

The crack spread of Eurobob oxy barge prices against North Sea Dated crude has narrowed to an average of \\$7.75/bl in July — this after it dropped to \\$13.07/bl in the second quarter from \\$18.05/bl in the same quarter last year. At the same time, cracks for German heating oil and diesel have been at their lowest for at least five years in the first half of this year. German refiners could react to the low current margins by reducing output in the coming months, which would be a step towards easing the oversupply in Europe.