LONDON, Nov 8 (Reuters) - European traders may increase gasoline shipments to Brazil, west Africa and other regions this month, taking advantage of a diversion of U.S. Gulf Coast cargoes from these areas to the Northeast after storm Sandy.
A rare waiver allowing foreign-flagged ships to transport oil products to the U.S. Northeast, where shortages have caused long lines at the pump, has led several companies to ship fuel there from the Gulf of Mexico.
European firms have not been able to take direct advantage of the waiver, partly because of the time required to ship gasoline across the Atlantic.
But the waiver, by curtailing the flow of U.S. Gulf Coast gasoline to other destinations, could still result in fresh opportunities for European traders.
“I don’t think there is too much buying in west Africa, but with the Jones Act waiver, that should change a bit,” a European gasoline trader said.
“(The price of) U.S. Gulf Coast gasoline was very weak ... those barrels were arbing everywhere. Even west Africa.”
He said the shift in Gulf Coast volumes was potentially creating an opportunity to export to west Africa instead.
A number of traders cautioned that gasoline prices in west Africa were not high enough to make it profitable for many firms. At least one said, however, that the region was still a better option than the United States.
“I am working other stuff. China, west Africa,” another gasoline trader said, explaining why he did not plan to ship a single barrel of gasoline to the United States in the aftermath of the storm.
Many firms cannot profit on shipping gasoline to west Africa partly because of recent strength in pricing for gasoline components including naphtha. The gasoline specification for west Africa tends to be naphtha-heavy, making it relatively expensive to produce.
“Components can’t be found, because we ship them all to China,” the second trader said.
Naphtha, which typically trades at a discount to gasoline, has at times been more expensive than the motor fuel for November delivery.
A third trader cited Brazil as a potential market as a result of the diversion of U.S. Gulf Coast cargoes.
“Everything is so slow though. I am not holding my breath,” he said this week.
So far, four companies have told the United States since last Friday that they intend to take advantage of the waiver. But the number of shippers could rise, given that companies do not have to tell the government they intend to ship oil to the Northeast until 24 hours after loading it in the Gulf of Mexico.
U.S. oil traders could profit by nearly $2 million on each exempt cargo of gasoline they are able to ship from Houston on the Gulf Coast to New York, according to Reuters’ calculations. The journey takes around a week.
The waiver applies to the loading of oil products from the Gulf of Mexico until Nov. 13 and the delivery to ports in the Northeast by Nov. 20. (additional reporting by Claire Milhench and Jonathan Saul; editing by Jane Baird)