Gasoline: Higher freights and weaker buying interest cap prices

The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis was unchanged on week. However, downward pressures were strengthening on the market due to surging freight rates. Freight rates were sharply increasing after the US imposed economic sanctions on tankers that carry crude oil or refined products from Russia. In addition, sluggish demand was another bearish factor. Sales by traders were low and they were curtailing fresh sales of cargoes. Inventories in Singapore stood high.

In China, PetroChina, one of the main sellers of gasoline, was possibly going to fix its export schedules in February this week, but a total export from the country was anticipated to remain few. Domestic demand in the country was likely to increase as the Lunar New Year holiday would start in late January. In addition, business days in February are few and domestic prices were on the rise, so that refiners in the country were expected to focus on the domestic market.

Naphtha: Sales in Asia remain ample

Talks on cargoes for delivery in the first half March started. According to sources, there were many cargoes which were available for sale in the spot market, so that fewer arbitrage cargoes had small impacts on the market prices. One Japanese petrochemical company bought one 25,000mt cargo of open-spec for delivery in the first half March at a premium of around $4/mt to the quotations to be assessed 40% of 30 days before and 60% of 45 days before on a CFR basis.

Demand for heavy grade remained weak as market sentiment of gasoline and petrochemical products was soft. According to a source, one refiner in Northeast Asia reportedly tried to sell heavy grade. The company had a surplus cargo refined at its refinery because it reduced the operation rates of its reformer.

Supply of naphtha would likely decrease or freight rates were expected to rise more and more due to sanctions on Russia by the US.

Middle distillates: Jet fuel and 0.001%S gasoil down

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia lacked strength. Inquiries from the US were sharply retreating where demand had been steady. A market participant pointed out that a lot of flights had been cancelled due to the cold wave and fires in the Middle and the West in the US and demand for the fuel decreased. In addition, procurements from Japan ended. On the supply side, sales volumes from China were said to be enough. PetroChina was expected to sell 700,000mt of February-loading cargoes.

The differential for SR-size cargoes of kerosene on an FOB South Korea basis was stable. According to a trader, due to the low temperature in South Korea, domestic demand for the fuel was increasing and a part of oil firms in the country moved on trying to allocate volumes to the domestic market that had been initially scheduled to be exported with SR-size vessels. In this situation, they would probably had limited export availability.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis declined. Backwardation was expanding in the Singapore futures market, showing that the physical price was also expected to go down. Therefore, the tradable price for cargoes loading in late February went down. However, supply/demand fundamentals were tighter than other oil products. Inquiries from Europe were strong due to increasing demand for heating with the cold weather. Indian and Middle Eastern cargoes were being directed to EU, and inflows into the Asian market were limited. Chinese companies were also expected to focus on jet fuel exports and curb exports of gasoil, which was also limiting supply.

Fuel oil: HSFO extends rise on short supply concern

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis was slightly rising. The market prices continued to be lifted up by prospects that Asia would face less cargoes of high sulfur fuel oil (HSFO) shipped from Russia due to US's ban. As previously reported, many players started to view that China and India were likely to purchase more cargoes from alternative countries or areas instead of Russia.

Freight rates

The freight rates of clean and dirty LR-size vessels between the Middle East and Singapore went up. A sense of tight supply of vessels was emerging in the market as some tankers were unable to stop by ports in some countries such as China after the US imposed sanctions on tankers that transport crude oil or refined products from Russia. Some market players stayed in a wait-and-see stance for transactions of oil products.

Market News

Prices for oil products including gasoline, naphtha and gasoil surged in China from last week. As tankers with crude oil from Russia have been sanctioned by the US, they are unable to drop in ports in China and to unload crude oil. There are views that some refiners would curtail operations of their refineries due to lack of feedstock in case the sanctions would be prolonged. A source at a Chinese oil company said that market players were possibly going to stay in a wait-and-see stance at least until the Chinese New Year holidays would be over.