Gasoline: Buying interest recedes in backwardation market

The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis declined on week. Traders were curtailing their purchases of cargoes loading in late December to avoid the risk of the timing spread as the contango market was deepening. The timing spread between Dec/Jan contract in the Singapore paper swaps market stayed at around $1.00/bbl in favor of December. In the meantime, China National Offshore Oil CO (CNOOC) sold an MR-size cargo of 92RON gasoline loading in late December from South China at a premium of $1.70/bbl to the quotations on an FOB basis.

In South Korea, sales of December cargoes were seen as almost over and fresh sales were hardly seen. However, if the tax cut policy in the country would be postponed, which was scheduled at the end of this year, refiners were possibly going to sell volumes at home which were built up in preparation for the last-minute demand in the domestic market.

Naphtha: Supply decreases from Russia and ME

Open-spec naphtha prices on a CFR Japan basis were at a premium of $9.00-10.00/mt to Japan quotations to be assessed 30 days before delivery. The premium was on the rise on decreasing supply. The arbitrage cargoes from Russia to Asia retreated with the thick fog in the Black See and the volume from the Middle East decreased. In the meantime, there was no fresh bearish factor in the spot market, so that the current market prices would probably continue until Russian cargoes disappeared.

In South Korea and Japan, it was heard that several companies cut volumes of annual term contracts and planned to procure spot cargoes to adjust their inventories level.

Middle distillates: Sentiment weakens on retreating demand from other regions

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis slightly went down. Buying interest was slowing down. In the U.S., regular maintenance of refineries was seen as almost over. In addition, glitches at some refineries were gradually being resolved, and that was reducing the need for the U.S. oil companies to purchase Asian-loaded products for short-covering. Buying interest by Japanese refiners had also calmed down, and tightening supply/demand fundamentals had been eased.

A Swedish-based energy firm Preem announced that it would start renovation works to turn the gasoil production unit that for renewable energy including sustainable aviation fuel. Preem announced that it would start the project from 2024 and was aiming to start productions in 2027. Its annual production ability would be 1.20 mil cubic meters of renewable energy including 600,000 cubic meters of SAF. On the other hand, the company would slash emissions of carbon dioxide 200,000mt per year.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB stayed in the same level. However, market sentiment remained soft as demand from other regions didn't increase. Demand for Northeast Asian cargoes from other regions was limited. In Europe, some refineries decreased yields of gasoil, but a market source pointed out that the decreasing production volume would take effect in late January at the earliest and a sense of oversupply would continue. In Australia, Geelong refinery was able to raise the operation rates and no procurement for short-covering was heard in the spot market.

Fuel oil: Korean refiners moving to sell 0.5%S FO

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. No fresh talks on cargoes loading in December were reported. However, as mentioned, refiners in South Korea continued to move on sales for cargoes and the arbitrage cargoes were expected to increase. One of the refiners in South Korea was reported to sell 7,000mt of 0.5% sulfur fuel oil loading in November at an early stage at a slight discount to the quotations on an FOB basis.

In the second half November, Korea District Heating Co bought 27,000mt of 0.3% sulfur fuel oil for delivery during Dec 8-17 at a premium of $70.00-80.00/mt to Singapore quotations (0.5%S) on a CFR Japan basis. The buyer was Vitol. The cargo seemed to be traded at a higher price due to its smaller-than-usual MR-size cargo and unusual specifications.