Products: Apr 26-30: 0.5%S fuel oil weakens with lower VLSFO prices
The differential for MR-size cargoes of 92RON gasoline on an FOB China basis was unchanged.
West Pacific Petroleum Co Dalian (WEPEC) seemed to supply all its volumes to term lifters in May. In the meantime, Indonesia's state-owned Pertamina closed a buy tender for 200,000-350,000bbl of 92RON gasoline to be loaded on May 1-5 from Singapore or Malaysia, or to be delivered on May 7-10 in Indonesia on Monday. The price validity date was set on Tuesday.
On the other hand, supply was increasing. It was reported that cargoes from the Middle East were flowing into Asia. As the capacity of refineries in the region was expanding, more cargoes were expected to come into Asia. As reported, due to firm gasoline refining margins, refiners in China and South Korea were also increasing their exports in May. The margins hovered at around $9.00/bbl over Dubai crude oil prices.
The differential for naphtha on a CFR Japan basis kept weakening. Mitsui Chemical seemed to have bought open-spec naphtha for first-half June delivery at a discount of around $1/mt to Japan quotations with first-half May pricing through a tender. More than 10 companies joined the tender and several sellers offered at a discount to Japan quotations. A market source in Northeast Asia said that waiting time for sailing in the Panama Canal was shortening to two days, so that opening the arbitrage from the US for open-spec cargoes was a bearish factor for the prices on a CFR Northeast Asia basis. Further, Hanwha Total and GS Caltex in South Korea seemed to have procured heavy full range naphtha for first-half June delivery at a premium of $5/mt to Japan quotations, last week.
The differentials for MR-size cargoes of jet fuel on an FOB South Korea basis softened on weak demand. Inquiries for cargoes to be brought into the US were retreating. Due to higher freight rates, the arbitrage window for cargoes to flow into the US from Asia was temporally closed.
The differential for SR-size cargoes of kerosene on an FOB South Korea basis was declined. Demand in Japan was weakening as the winter demand season was already over. Some Japanese trading houses intended to buy volumes to build up inventories if they could secure with lower prices. Due to the wide gap between offers and bids, no deals were reported to date.
The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis weakened as prices of VLSFO for bunker were going down by the price competition and market values of 0.5% sulfur fuel oil as the feedstock were under downward pressure. On the impact of bargain sales for VLSFO in China due to digesting stocks, the price discount was influencing to South Korea and Singapore as well, so that differentials for VLSFO and 0.5% sulfur fuel oil as the feedstock were down. A South Korean oil company reported that the differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was weakening to a discount of around $20.00/mt to Singapore quotations (0.5%S). The oil company added that players were actively increasing sales to catch demand even though the differentials were low.