Products: Jul 20-22: Declining arbitrage cargoes to Asia for August supports naphtha markets
The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis was unchanged. The spot market was quiet due to a lack of both offers and bids. Demand in Southeast Asia including Indonesia seemed to be sluggish due to the COVID-19 outbreak and the rainy season. Meanwhile, refiners in China and South Korea had some spot cargoes for sale loading in August, but they had yet to sell any of them. On Monday, Formosa Petrochemicals Co (FPCC) in Taiwan closed a term sell tender for 93RON gasoline loading from August to December. Two traders were reportedly awarded at a premium of $1.10/bbl and $1.35/bbl to Singapore quotations on an FOB basis.
In Northeast Asia, naphtha supply was increasing as operation rates of refineries were recovering. On the other hand, demand of petrochemical products, especially in China, remained weak. Also, reasonable prices of liquefied petroleum gas (LPG) accelerated to switch demand from naphtha to LPG, so that naphtha markets were under pressure. In the meantime, arbitrage volumes from Europe, the US, and Middle East to Asia for August were expected to be around 1.6-1.7 mil mt as the volume would stay lower than at least 40% since May and it supported naphtha values.
The differential for MR-size cargoes of 0.05% sulfur gasoil on an FOB Northeast Asia basis was down on sluggish demand. No fresh inquiries for cargoes loading in August as imports into Vietnam had been ample from May to July. In addition, demand of gasoil for vessels off the coast of Taiwan was declining in part due to the fishing ban across the coast of mainland China. Meanwhile, a refiner in South Korea was talking on 0.05% sulfur gasoil loading in August. A bid for the cargo was heard at a discount of $1.00/bbl to Singapore quotations, and the seller perceived that a deal would take place at a discount of 70-80cts/bbl to the quotations on an FOB basis.
The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. Discussions on spot cargoes of 0.5% sulfur fuel oil from Northeast Asia still lacked momentum. Export availability of each refiner in the region seemed to be low. In the meantime, PTT Global Chemical was said to have sold 60,000mt of 0.5% sulfur fuel oil loading in mid-August at a discount in the high $40's/mt to Singapore quotations (0.001% sulfur gasoil) on an FOB basis.