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By Ahmad Ghaddar and Libby George
LONDON, March 10 (Reuters) - Gasoline stocks building onboth sides of the Atlantic could undercut a sustained recoveryin oil prices, as crude's 30 percent rise in the last month ispartly based on hopes that drivers will gobble up most globalinventories of the fuel.
Strong margins on gasoline have helped European refinerssuch as BP, Shell and Total weather an18-month slide in oil prices and they expect gasoline demand,mostly in the United States and China, to boost profits thisyear too.
But gasoline's profitability could come in well underexpectations if demand fails to keep up with rising supply.
Oil this week hit a 2016 high above $40 a barrel,lifted in part by the prospect of refineries sucking up crude tofeed summer driving demand for gasoline and trimming a mismatchof 1.5-2.0 million barrels per day between supply and demand.
Like diesel last winter, excess gasoline is pooling inonshore tanks as well as on ships anchored off refining hubs anddawdling along slow-steaming routes around Africa - traders aresitting on the fuel to cash in on higher future prices.
The gasoline contango, in which prices for delivery in onemonth are at a premium to those for prompt sale, reached $90 atonne, around three times the level a year ago.
"Even if some of the currently stored barrels move to Eastof Suez markets, the fact is that there is a lot of inventorybeing built up that will cap the upside to prices over the nextfew months," Energy Aspects warned in a note last month.
Gasoline stocks in Europe's Amsterdam-Rotterdam-Antwerp hubhit a record in February of 1.33 million tonnes, up 60 percentyear on year, according to consultancy PJK International.
And U.S. gasoline stocks are still 4.4 percent above lastyear's level, according to PVM Oil.
THE LONG WAY AROUND
Onshore tanks do not reflect the extent of the stock build.
Around 500,000 tonnes of oil products are being stored ontankers around Europe and the Mediterranean, much of itsummer-grade gasoline and blending components.
That amount is equal to a quarter of total imports of bothproducts in December into the United States.
There are also at least three tankers, each with 80,000 to90,000-tonne cargoes of gasoline-blending components, taking thelong route to Asia around the tip of Africa, rather than cuttingthrough the Suez Canal, according to traders and Reutersship-tracking data.
These include the Riverside, STI Orchard and Captain Paris.Thanks to the contango, every day their journeys last makestheir cargoes more valuable when they land.
It's not just in Europe where gasoline stocks are buildingoff the radar. On the U.S. Gulf Coast, La Boheme and Navig8Honor are storing gasoline, and trader enquiries for floatingstorage are picking up.
The rationale is the anticipation of strong demand fromChina, India and the United States, where car sales are risingin what are already three of the world's largest auto markets,to soak up this excess gasoline.
"Those cargoes are building for a reason - the world isgoing to need them," one trader said.
The level of support fuel consumption lends to refineryprofits, and crude oil prices, depends on how much more gasolineneeds to be made in addition to what's already waiting.
"We still believe that the supply response to theunequivocal price signals the market has sent over the last fourmonths - to produce and store summer-grade material - has led toa buildup in storage that will be released in the middle ofApril once the switch to summer gasoline occurs," Energy Aspectssaid. (Additional reporting by Ron Bousso; Editing by Amanda Cooperand Dale Hudson)
