Products: Nov 25-29: 0.001%S gasoil dips on several bearish factors
The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis stayed intact. Talks on spot cargoes were inactive as discussions on cargoes loading in December were coming close to an end. Only an SR-size cargo of 95RON gasoline loading in December from South Korea for Vietnam was traded. In the meantime, no spot purchases were seen from Southeast Asia. Gasoline refining margins over Dubai crude oil stayed at around $9.50/bbl. It was said that the level was healthy for this time of the year.
In the Northeast Asian spot market, the deal prices were staying at high levels. On the back, spot demand by South Korean end-users were continuing. A Northeast Asian end-user said that South Korean buyers have been postponing the term contract starting from January due to surges in the Northeast Asian prices and have been procuring spot cargoes for replenishing the shortage. Recently, the deterioration of refining margins for oil products was pushing down refinery run rates. Meanwhile, naphtha crackers were keeping full operations in Asia, a sense of tightness in supply and demand was strengthening. Under such a circumstance, an Asian market source viewed that the run rates of naphtha crackers would go down sooner or later along with lowering run rates of refineries.
The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis dipped. Several bearish factors were seen in the market. Toward the end of the year, traders were reluctant to procure cargoes loading in December. In addition, freight rates were also increasing. Moreover, the paper swaps market in Singapore was in backwardation, so that the downward pressure was strengthening on the differentials for cargoes loading in the second half of December. Although details were unknown, a 0.001% sulfur gasoil cargo loading in the second half of December from South Korea was said to have been traded at a discount in the range of 60-70cts/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 up with tightness in supply and demand. Ahead of the strengthening sulfur regulation for bunker by International Marine Organization (IMO), demand for 0.5% sulfur fuel oil was spiking in South Korea. Against this, supply was limited and prices were hiking. In the country, in addition to the start of supply for 0.5% sulfur fuel oil from November by S-Oil and Hyundai Oilbank, GS Caltex and SK Energy were importing sweet crude oil and increasing the production of 0.5% sulfur fuel oil. Nevertheless, one of South Korean oil companies explained that supply has not been meeting the rapid increases in demand for 0.5% sulfur fuel oil.