Gasoline: Domestic demand increasing in China

The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia strengthened on week. Recent falling freight rates pushed up the FOB prices in Northeast Asia. In addition, less supply was also perceived to be a bullish factor. In China, domestic demand was increasing and exports in August were unlikely to expand. Exports from the country in July were expected at around 850,000mt. In South Korea, supply of term cargoes seemed to be few during summer and spot availability of each refiner was said to be limited. In addition, inflows from the Middle East were decreasing. Also, lower freight rates supported prices on an FOB basis.

Naphtha: Talks on 1h Sep cargoes slow

Talks on cargoes for delivery in the first half September started. One Japanese petrochemical company bought 25,000mt of open-spec naphtha for delivery in the period at a low single digit premium to Japan quotations to be assessed 45 days before on a CFR basis via a tender closed on Tuesday. However, no deals were heard in the spot market after this tender. A view surfaced that spot demand would unlikely increase. Japanese companies might probably decrease inventories for the first half fiscal year in September. In South Korea and Taiwan, the operation rates of naphtha crackers were continued to be capped.

Idemitsu Kosan Tokuyama plant in Japan shut down the naphtha cracker operation on Jul 15 because of a gas leakage from a unit. According to sources, this naphtha cracker was expected to stop operations until. In South Korea, Lotte Chemical shut down its naphtha cracker in Daesan on Thursday. However, Lotte seemed to restart operation within this week, it was reported.

Middle distillates: Jet fuel market up but 0.001%S GO market down

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went up. Declining freight rates for MR-size vessels were pointed out to push the market prices up. According to sources, trades of cargoes on an FOB basis had been temporarily decreasing because of the recent high freight rates, but as supply/demand balances for MR-size vessels were eased, trading volumes decreased and the freight rates appeared to went down. Several MR-size cargoes loading in the second half August were traded at a discount of high $1's/bbl to Singapore quotations on an FOB basis. In the meantime, export volume in August from China was expected to be at around 1.5 mil mt including cargoes bounded to Hong Kong.

American Airlines announced on Jul 2 that it used around 2.70 mil gallons (10,200kl) of sustainable aviation fuel (SAF) in 2023, up 4% on year. However, it accounted for only less than 1% of its total annual use of jet fuel in the year. The company is aiming to raise the usage proportion of SAF to 10% by 2030, and is establishing the procurement system from several sources. However, it had procured only small amounts of SAF to date.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis went down on slack supply/demand fundamentals. A South Korea-based refiner sold two MR-size cargoes for mid-Aug loading at a discount of $1.60/bbl and $1.80/bbl to Singapore quotations on an FOB basis through a tender closed on Wednesday afternoon. The company had been building up domestic inventories in July in anticipation of a tax cut rates on oil products starting and the last-minute demand. However, domestic sales were sluggish and the company was releasing inventories in the international market. As for 0.001% sulfur gasoil, the company had already sold at least six MR-size cargoes for August loading, and four or five cargoes might be added.

Fuel oil: Korea's Aug cargoes seen amid low appetite

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis was unchanged. Despite the unaltered surface prices, the underlying market tone was soft because of heavy supply pressures. A South Korean oil firm seemed to have a few spot cargoes of middle-to-high sulfur fuel oil for loading in August, a trade source said. Meanwhile, no players rushed to secure fuel oil cargoes with anemic demand for bunker fuel and a base material of a refinery. Few traders were interested in procuring cargoes to resell to major markets such as Singapore or China. In Japan, although some refineries suffered from troubles, most oil companies and traders apparently held back from active trade.