OPIS Headlines

April 14, 2015
Lower Gas Prices Appear to Lift Consumer Optimism

Cheaper fuel prices are driving stronger consumer optimism about the economy, according to a survey just released by the National Association of Convenience Stores (NACS).

Some 52% of Americans surveyed said they were optimistic about the economy, and that reflects an eight-point jump from a March survey. About 58% of younger consumers, age 18-34, are optimistic and a cross section of western motorists also have a favorable view.

NACS has been conducting the survey since January 2013, but April represents only the third time that a majority of Americans expressed optimism about the economy. Of course, gas prices were more than $1/gal higher in 2013 and 2014.

More than half (52%) of consumers also believe that gas prices in 30 days will be about the same or lower than today. The previous survey saw only 26% looking at a flat-to-lower gas price outlook.

Gasoline prices retain their special resonance with U.S. consumers. Some 76% of Americans say that gas prices impact their feelings about the economy. But the number of respondents stating that gas prices have "a great impact on their feelings" has slipped to 25%, the lowest level since NACS has conducted the survey.

NACS, which represents the convenience store industry that sells 80% of the gas sold in the country, conducts the monthly consumer sentiment survey to gauge how gas prices affect broader economic trends. The NACS survey was conducted by Penn, Schoen and Berland Associates LLC; 1,103 gas consumers were surveyed April 7-9, 2015. Summary results are at www.nacsonline.com/gasprices; click on "Consumer Research."

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April 14, 2015
Getty Divesting Properties in Seven States

Getty Realty Corp. is divesting six operating and non-operating gas stations and 27 commercial and retail properties across seven states, according to NRC Realty & Capital Advisors LLC, which is handling the transactions.

The properties are located in: Connecticut (6), Maine (4), Massachusetts (6), New Hampshire (2), New York (9), Pennsylvania (3) and Rhode Island (3).

The six operating and non-operating gas stations are urban and suburban markets in Maine, Massachusetts, New Hampshire and New York. The lots range from 9,580 square feet to 26,480 square feet and the buildings range from 1,200 square feet to 2,520 square feet, NRC said.

All are fee-owned properties and the sale includes the improvements on the underlying real estate, including the underground storage tanks. The properties are offered without gas brand or fuel supply. Minimum bids are listed for the sites and range from $145,576 to $520,000, NRC said.

The 27 commercial and retail properties are in Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania and Rhode Island. The lots range from 6,500 square feet to 1.19 acres and the buildings range from kiosks up to 2,700-square-foot buildings. Many of the sites are improved with automotive service bays. Minimum bids are listed for the sites and range from $40,000 up to $580,000, NRC said.

"These sites are very appealing for a multitude of gasoline, automotive, retail and commercial uses," said Evan Gladstone, NRC's executive managing director. "A majority of the sites are located on high-traffic corners in mature neighborhoods and in small towns. Investors will also be interested in bidding on the locations which have license agreements with operators."

The properties will be sold using NRC's "buy one, some or all" sealed bid sale process. Property Specific Packages are expected to be available in May, with a bid deadline of June 11, 2015.

Getty Realty Corp. is a publicly traded real estate investment trust in the United States that specializes in ownership, leasing and financing of convenience store/gas station properties. The REIT owns and leases about 860 properties nationwide.

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April 9, 2015
Brazil's Ethanol Inventories Still Higher Y-O-Y Despite Draw in 1H March

Brazil's hydrous and anhydrous ethanol inventories saw sizable draws during first-half March, but inventories remain significantly higher than where they stood a year ago, figures from Brazil's Ministry of Agriculture show.

The higher inventories -- along with the weakening of the Brazilian real versus the dollar -- facilitated exports of Brazilian sugarcane ethanol during the South-Central region's interharvest period, which coincides roughly with the calendar first quarter. The same factors also curbed exports of U.S. ethanol to Brazil.

The figures show South-Central anhydrous ethanol inventories totaling 1.725 billion liters at mid-March, representing a 39.5% increase over inventories on hand a year earlier (1.237 billion liters).

South-Central anhydrous inventories saw a draw of 413.5 million liters during first-half March, representing a 19.3% drop in inventories.

During the same period last year, anhydrous inventories fell by 387.8 million liters, which represented a 23.9% drop.

In Brazil, anhydrous ethanol is blended into gasoline, currently at a blend rate of 27%. Hydrous ethanol in Brazil competes with gasoline at the pump.

The latest figures show South-Central hydrous inventories totaling 1.890 billion liters at mid-March, or double the 944.8 million liters recorded at the same time last year.

South-Central hydrous inventories saw a draw of 579.8 million liters during first-half March, representing a 23.5% drop in inventories.

During the same period last year, hydrous inventories fell by 404.3 million liters, which represented a 30.0% drop.

Because of its lower fuel efficiency, hydrous ethanol is considered at price parity with gasoline when its price is 70% of the price of the fossil fuel.

Brazilian economic research institute Fipe reported this week that during the first week of April, hydrous ethanol pump prices on average were at 64.81% of gasoline pump prices in the city of Sao Paulo. That's compared to a price ratio of 72.26% during the first week of April 2014.

The Brazilian Sugarcane Industry Association (UNICA) reported recently that hydrous ethanol sales by South-Central producers reached record levels during first-half March. That achievement is being attributed in part to higher tax rates on gasoline, which essentially serves to make hydrous ethanol more competitive.

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April 8, 2015
European Airlines Struggle to Compete with Ryanair Passenger Growth

European airline operators Air France-KLM and International Airlines Group (IAG) are struggling to keep pace with Ryanair's passenger growth, according to data released by the companies today.

IAG's group passenger traffic increased 10.5% in March, compared to year-earlier figures, to 6.28 million.

This was driven by a 16% rise in traffic on IAG's budget carrier Vueling, to 1.27 million passengers.

Passenger traffic on IAG's other carriers -- Iberia and British Airways -- increased by 11.5% and 5%, respectively.

The IAG group's rolling annual passenger traffic to the end of March was up 9%, compared to the previous year, to 16.67 million.

Air France-KLM's passenger traffic increased by just 0.4% in March, according to company data also released today.

According to figures released on Air France-KLM's website, the group -- which includes Air France, KLM, HOP! and Transavia -- carried 6.9 million passengers in March, just 100,000 more than in the same period a year earlier.

The slight increase in group traffic was driven by a 9% rise in passenger numbers on budget airline Transavia. Transavia carried 636,000 passengers in March, up from 584,000 a year earlier.

Excluding the increase in Transavia's March passenger figures, the group's total passenger traffic fell 0.4% year on year to 6.27 million.

Air France-KLM's rolling passenger traffic for the 12-month period to the end of March was up 1.2% from a year earlier, to 19.02 million. It's load factor -- which measures capacity utilization -- increased by just 0.2% year on year, to 83.7%.

Both IAG's and Air France-KLM's passenger traffic growth is far behind European rival Ryanair.

On April 7, Ryanair announced its passenger traffic was up 28% in March compared to year-earlier figures, to 6.67 million customers.

The budget carrier's load factor also increased by 10% year on year in March, reaching 90%. Ryanair's rolling annual traffic to the end of March increased by 11%, compared to March 2014, reaching 90.5 million customers.

Hundreds of flights to and from France on carriers including Air France-KLM, Ryanair and EasyJet have been canceled today because of a strike by French air traffic controllers on April 8 and 9.

Air France-KLM said it would only operate around 60% of its scheduled medium haul flights to and from Paris' Charles De Gaulle airport on April 8 and just 30% of flights from Orly airport, also in Paris.

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April 7, 2015
Global Ref. Margin Forecast to Remain Healthy in Q2 Despite Gradual Decline

Global oil refining margins have softened over the past week, but remain at robust levels globally, according to a biweekly margin report issued by Credit Suisse on Tuesday.

Overall, margins should remain strong in the second quarter, but on average will be somewhat softer than the crack spread over the past few weeks, it added.

This year will be a year of two halves, with the first half being stronger than the July-December period, but the absolute levels thus far have surprised on the upside, the bank said.

Refinery maintenance is expected to depress crude intake until May in the Atlantic Basin and June in Asia, which could see about 1.5 million b/d in crude inventory build.

There is a risk to the upside on refinery crude demand from healthy forward margins in Europe/Asia, which could allow refineries to keep run rates higher than expected, the bank said.

"The degree to which refiners have postponed planned maintenance on the back of healthy margins, hedged forward margins (which we have started to see), and oil product demand growth, will impact the supply side of the equation for products," Credit Suisse said.

"Thus, runs could be higher leading to potential overproduction of products, which could in turn impact crude demand later in the year," it said.

The bank also noted that Official Selling Prices (OSPs) are not used to reduce or raise output, but rather to limit the capture of petroleum rent by refiners.

The OSP is determined by a formula, which depends on estimates of Gross Product Worth (GPW) based on information from previous months.

However, the extent of price change can be used to gauge Saudi's intent in the market. Saudi's OSP for May-loading saw prices for Asian buyers increased across the board with a widening spread in quality (light versus heavy barrels).

This update is likely a function of a narrower Dubai contango and healthy margins, while the widening spread in quality is a function of the naphtha crack, Credit Suisse said.

In terms of the framework agreement with Iran, for the purpose of this note, the bank sees limited volumes in the physical market in the second half of 2015, and likely more a 2016 event for oil markets (i.e., pace and sequence of sanctions relief).

Once more, Iranian crude exports hit (EU) markets, albeit the absolute level may be lower due to a reduced supply base; complex refiners will benefit more as this should widen light/heavy crude spreads, it said.

On the second-quarter outlook, the global refining margin is likely to soften further from the previous quarter, but margins are expected to be relatively healthy, Credit Suisse said.

Gasoline led the charge in the first quarter (usually a weak quarter seasonally) from better end-user demand, unplanned outages and more recently from the emerging demand for the more expensive summer grade material, it said.

"Whether current levels can be sustained is debatable (not our base case) with Atlantic basin stocks at healthy levels and US runs rising long before the summer driving season begins in earnest," it said.

Naphtha staged a rally in the first quarter; strong gasoline blending and petchem demand helped, but the crack spread should soften in the second quarter due to heavy cracker maintenance in Europe/Asia, and increased feedstock switching.

Middle distillates should be in for a period of lower cracks post the winter heating season in the Northern Hemisphere, particularly with the supply side weighing.

High supply levels from the Middle East once the megaplants are fully ramped up in the second half could impact the crack spread.

The impact of lower low sulfur fuel oil bunker demand in the Atlantic Basin was somewhat concealed by winter-weather conditions in the U.S. (i.e., power gen demand), Credit Suisse said.

Higher supply should weigh (new startups initially will produce more without conversion units), with the wild card being lower exports from Russian teapot refiners, it said.

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