UK: Coryton refinery closure

UK gasoline cargo prices rise on news of Coryton plant closure

Platts,

25 January, 2012

The outright price of CIF Thames gasoline cargoes increased Tuesday following European refiner Petroplus' decision to file for insolvency and halt product shipments from its 220,000 b/d Coryton refinery in the UK.

CIF Northwest European cargoes into the Thames estuary gained $3/mt on Tuesday to be assessed at $984/mt, or a $21/mt premium to NWE Eurobob barges at $963/mt. The premium over EBOB barges was up $4/mt on the day, from $17/mt on Monday's close.

The rise comes despite a $0.45/b fall in the value of the front-month ICE Brent crude futures contract Tuesday, with sources active in the market attributing the gain to concerns about the halt in shipments from the Coryton refinery.

"If Coryton goes cold, then it will tighten up the Northwest European barge market," one European gasoline trader said following the announcement. "It's already looking a bit tight with the arbitrage [route to the US] open." 

The Coryton refinery on the Thames Estuary is an important producer of gasoline, much of which is sold into the local market. The plant supplies approximately 20% of the fuel for London and the southeast of the UK.

Accounting and consultancy group PwC, which was appointed administrator of Petroplus' UK assets following the insolvency filing, said in a statement that it hopes to keep the Coryton refinery operational. Coryton has continued production, despite the halt on outward shipments, sources said.

"Due to the insolvency act they can't trade and have stopped shipping fuel out but are still producing...they've still got some stock," a union official told Platts.

On Monday, market sources told Platts that gasoline companies in the UK supplied by Coryton have been diversifying the sources of their supply in the event that Petroplus is forced to make further cuts to Coryton's production.

UK traders said the decision to halt outbound shipments of gasoline will likely accelerate this process and increase the demand for gasoline imports from Northwest Europe, although they added that it is unlikely to lead to a dramatic increase in outright gasoline prices.

"The market is a bit tighter for sure," a European gasoline source said. "But it's not as tight as one might have thought it would be. People have been arranging for alternative supplies, alternative loadings to make sure they have enough stock. Prices will be determined on a European basis, and there's plenty of gasoline around." 

Petroplus, Europe's largest independent refiner, was forced to temporarily close three of its five European refineries in late December, after lenders cut off a key credit line used to secure crude oil.

Throughout January, the company continued operating Coryton and the Ingolstadt refinery in Germany at reduced rates.