Products: Aug 14-18: Jet fuel sharply up with a strong sense of tight supply
Gasoline: Changes vary depending on quality of loading locations
The differentials for MR-size cargoes of gasoline on an FOB Northeast Asia basis were changed on week, depending on qualities or loading locations. The differential for MR-size cargoes of 91RON gasoline on an FOB South Korea basis and the differential for MR-size cargoes of 92RON gasoline on an FOB Japan basis increased sharply on tight supply/demand fundamentals.
Buying interest for cargoes loading in early September to be brought into Mexico or India was quite active. With the low sea level of the Panama Canal, chartering vessels from the US to Mexico became sluggish, so that purchases of Asian cargoes were intensive. In India, Hindustan Petroleum Co Ltd (HPCL) or Baharat Petroleum Co Ltd (BPCL) were willing to purchase cargoes for delivery in the first half of September in the country. Demand in the country had stayed firm, but their selling interest became much stronger for short-covering due to some troubles of refineries in India. In China, refiners were unable to move on sales for cargoes as the government had yet to grant the third export quotas of oil products this year. The market in Aisa was rapidly getting tight.
On the other hand, the differential for MR-size cargoes of 93RON on an FOB Taiwan basis declined due to retreating buying interest.
Naphtha: Markets lack in strengthens and crack margins not wider
The differential for open-spec naphtha on a CFR Japan basis was at a premium of $4.00-5.00/mt to Japan quotations to be assessed 30days before the delivery. Operation rates of naphtha crackers remained low and demand for naphtha didn’t increase as markets of petrochemical products and derivatives. The price spread between Oct Brent/H1 Oct naphtha continued to be mostly at low $10’s/mt. The spread was expected not to widen as crackers cut operation rates but run rates of refineries were high.
It was heard that inquiries for heavy grade naphtha would likely decrease onward as gasoline demand season in Summer would finish soon.
Middle distillates: Gasoil markets weaken with an expectation that Korea increases exports
The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went up with a limited supply. At present, only South Korean refiners such as SK Energy moved on sales. No fresh deals were heard from China, Taiwan and Japan.
In China, the government had not yet noticed the third export quotas of oil products and domestic oil companies were unable to start selling September cargoes. This was one of the reasons to decrease sales volume in Northeast Asia. In Japan, Cosmo Oil was said to be a in short position.
The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia softened reflecting backwardation in the Singapore paper market. The South Korean government announced on Wednesday that it would extend the tax cut of oil products until the end of October. The government had been applying a 37 percent discount on the consumption of gasoil. The government had scheduled to end the benefit at the end of August originally, so that South Korean oil companies had been building up domestic inventories of gasoil in anticipation of temporal demand for higher market prices in September and beyond. Traders had pointed out that the extension of the tax credit cut might lead to South Korean oil companies to boost sales in the international spot market.
The differential for MR-size cargoes of 0.05% sulfur gasoil on an FOB Northeast Asia basis went down as well on slackening of supply/demand fundamentals. Buying inquiries from Southeast Asia were almost over. Under these circumstances, there were scattered selling interest from South Korea, which pushed down the market price.
Fuel oil: LSFO oversupply worries allegedly wane
The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was stable on week. The market still saw no new discussions for low sulfur fuel oil (LSFO) loading in South Korea. On the other market front, India’s Bharat Petroleum Corporation Ltd (BPCL) was apparently attempting to sell 0.5%S fuel oil and very low sulfur fuel oil (380cst) each weighing 20,000/mt loading on Aug 28-29. Meanwhile, Kuwait National Petroleum Co (KNPC) seemed to currently decrease the export volume of 0.5%S fuel oil produced at its 615,000 barrels-per-day Al Zour refinery, according to a market participant. Details, however, were unknown. Some players appeared to consider that anxieties for too-much LSFO supply weakened somewhat in the Asia area.
The price for VLSFO in Tokyo Bay was at $671.50/mt as of Aug 16, rising by $10.00/mt from Aug 9 with a rise in the Singapore 0.5%S fuel oil paper swap values.
