Products: Jun 28-Jul 2: FOB Korea for 0.5%S FO dips on ample VLSFO
The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis stayed flat. However, market sentiment was strengthening on the back of declining exports from China. Refiners in China were unable to make moves to sell cargoes as their export quota was running short. Also in the Singapore market, a sense of tight supply was emerging and prices were going up. Refiners in Northeast Asia had yet to fix export schedules in August, and were unlikely making moves to sell cargoes. In Taiwan, Formosa Petrochemicals Co (FPCC) was planning to supply only term lifters in August, and would skip any spot sales.
In the Northeast Asia market, deal levels for high paraffine content naphtha were low. As a bearish factor, crack margin of ethylene whose feedstock is the naphtha was tending to be narrow. At present, a new naphtha cracker owned by GS Caltex in South Korea has been disrupted the startup due to trouble, and a part of the unit operated by Lotte Chemical was shut temporarily after turnaround. Although ethylene prices were supported by the thin supply, the CFR premiums for light naphtha to Japan quotations were perceived to be soft along with going down ethylene prices again once the runs would increase.
The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis was unchanged. However, market sentiment stayed firm on declining exports from China. Exports from China loading in July were very few as they were lacking export quota of oil products. In addition, it was speculated that exports in August were also perceived to be few. In Japan, refiners were reluctant to export cargoes loading in August due to some troubles at refineries and higher prices in the domestic market. Formosa Petrochemicals Co (FPCC) in Taiwan was scheduled to issue a sell tender for 500,000bbl loading at the end of August. A Middle East based trader reportedly resold an MR-size cargo loading in the second half of July to a trader at a discount of around 60cts/bbl to the quotations. The price seemed to have been low due to its relatively prompt laycan.
The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis dipped. Along with going down offer levels of VLSFO for bunker, discounts for 0.5% sulfur fuel oil as the feedstock of VLSFO widened. In South Korea, SK Energy was pulling up refinery runs, so increasing supply volumes lowered the differentials of VLSFO for spot sales remarkably compared to the term levels for Jun-Jul. In a reaction to this situation, a South Korean trader said that the differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was at a discount of around $25.00/mt to Singapore quotations (0.5%S).