Gasoline: Non-oxy market goes up as demand season approaching in Northern Hemisphere

The differential for MR-size gasoline on a FOB Northeast Asia basis for Non-oxy grade went up.

Talks for June-loading cargoes had commenced, and as the summer driving season in the Northern Hemisphere began, this was likely to put upward pressure on the market. Backwardation in the Singapore paper swaps market was also expected to stimulate buying interest for the first half June-loading cargoes. According to market sources, the June/July intermonth spread was in backwardation of $5-6/bbl.

In the spot market, last Tuesday, Formosa Petrochemical Corp (FPCC) in Taiwan sold two 250,000bbl cargoes of 92RON non-oxy grade gasoline for mid-June loading. For a total of 500,000bbl, the deal was concluded at a premium of over $3.00/bbl to the quotations on an FOB basis.

In Southeast Asia this week, one MR-size cargo of 91RON gasoline for early June loading from Brunei was already concluded at a premium of slightly below $2.00/bbl to the quotations on an FOB basis. The cargo was reportedly for Australia.

Naphtha: Prices fall as supply expected to recover

The second half June open-spec naphtha prices on a CFR Japan basis weakened. A sense of ample supply was emerging for June-loading cargoes on expectations of supply recovery.

In South Korea, Taiwan, and Japan, refinery run rates were reportedly recovering, and the volume of naphtha from refineries was increasing in some regions. Also, signs of supply recovery were beginning to emerge from inside the Strait of Hormuz. According to market sources, one Middle Eastern oil firm was reportedly supplying via ship-to-ship transfer outside the strait.

In the spot market, Asahi Kasei Mitsubishi Chemical Ethylene Corp (AMEC) in Japan reportedly purchased 25,000mt of open-spec naphtha for the second half June delivery on a CFR basis at a premium of around $45/mt to the quotations (45 days) last Monday.

In the downstream ethylene market, China's domestic ethylene prices were cheaper than import cargo prices, and market sources pointed out that it was difficult to sell ethylene to China. Some Chinese market players, including Sinopec, continued to seek exports, which was weighing on the international ethylene market.

Middle distillates: Jet market remains capped while China resumes exports to 14 countries

The differentials for MR-size jet fuel on an FOB Northeast Asia basis was unchanged. However, it was pointed out that market sentiment was weak. Spot sales for June-loading cargoes did not pick up. The Chinese government resumed exports of May-loading products to 14 specific countries, including ASEAN nations, Australia, and New Zealand. Market sources pointed out the possibility that demand in these countries would be met, leading to weaker buying interest in the spot market. According to market sources, Sinopec reportedly proceeded with sales of May-loading cargoes, but details such as award prices were unknown.

The differentials for MR-size 0.001% sulfur gasoil on an FOB Northeast Asia basis substantially was unchanged. It was reported that the Thai government was considering easing export suspension measures for petroleum products from May onwards. On Mar 1, the government had imposed export suspension measures on petroleum exports from refineries, aiming to stabilize domestic supply. However, exports to specific countries such as Laos and Myanmar had continued. Also, export suspension measures were not applied to exports from storage tanks in areas such as Sriracha, and PTT had been exporting gasoline and fuel oil as appropriate.

Fuel oil: Sense of tight supply strengthens

The differential for MR-size 3.5% sulfur fuel oil on an FOB South Korea basis remained unchanged. But a sense of tight supply was strongly perceived, and the fundamentals were bullish. The monthly spread in the Singapore paper swap market between May and June widened to over $56/mt in backwardation.

Market participants were concerned about a decrease in supply from Russia, one of the main export sources of the fuel. This was because Kirishi oil refinery that was primary refinery in the country stopped operations due to drone attacks by Ukraine early this week. It was expected to become difficult to procure cargoes from the Middle East. In the region, demand for high sulfur fuel oil for power generation was expected to increase during summer from June onwards. It might cause a decrease in sale of high sulfur fuel oil cargoes. Production of fuel oil had declined in Northeast Asia due to an increase in refining light crude oil and a shift in production to gasoline and middle distillates.

GS Caltex in South Korea was moving to sell an MR-size cargo of 3.5% sulfur fuel oil (380cst) due to troubles at its refinery. Last Friday, the company closed a tender to sell a cargo loading on Jun 1-8 or 8-14, but the results were not yet known. As previously reported, trouble of the residue fluid catalytic cracker (RFCC) occurred at the 800,000b/d Yeosu refinery late this week and it was expected to take about two weeks until its resumption.