GASOLINE

The differential for MR-size cargoes of 92RON gasoline on an FOB North Asia basis was unchanged. The Chinese government had yet to grant the second export quota of oil products this year to the oil companies in the country. However, amid rising inventories of refined products at home, demand of oil products was declining due to heavy flood in some areas, so that selling pressures could become strong. In the meantime, as COVID-19 was spreading out in Southeast Asia including Indonesia and Vietnam, no spot purchases were seen in the market.

NAPHTHA

In the Northeast Asia market, market sentiment for both term and spot cargoes was firm. In the spot market, a Northeast Asian end-user mentioned that the differential for open-spec naphtha on a CFR Japan basis was widening to more than $10/mt to the quotations. On the back of that, high prices of gasoline, ethylene and liquefied petroleum gas (LPG) in the US narrowed the arbitrage window to Asia, and t it was a supportive factor in Asia for prices of naphtha as feedstock of those products. On the other hand, the end-user pointed out that it would be a downward pressure for naphtha for second half September delivery as the feedstock for gasoline whose demand was expected to recede along with the end of driving season in the US in first-half September.

MIDDLE DISTILLATES

The differential on an FOB South Korea basis was pushed down on strong selling interests, while FOB differentials for other countries in Northeast Asia basis were unchanged. Refiners in South Korea were increasing production of 0.001% sulfur gasoil after demand of light cycle oil (LCO) in China was declining. In addition, demand of 0.001% sulfur gasoil in South Korea remained sluggish due to the COVID-19 pandemic, so that refiners in the country were said to be increasing exports of gasoil. In China, the government had yet to grant the second export quota of oil products this year, and movements to sell cargoes were still few.

FUEL OIL

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis unchanged. However, in South Korea, SK Energy, S-Oil, and Hyundai Oilbank were competing to sell VLSFO for bunker at dumping prices, and market sentiment of 0.5% sulfur fuel oil as feedstock of VLSFO was also weak. A South Korean trader reported that it was necessary for SK Energy to keep producing VLSFO for certain volumes along with profit plans since the company started the operation of the vacuum residue desulfurization unit (VRDS), so that supply of VLSFO could remain ample even if the sales prices were low. On the other hand, in the markets for 0.3 sulfur fuel oil, demand for power generation was extending in South Korea and Japan, but still the exports from South Korea to Japan were disrupted due to a shortfall of vessels for transportation. A source in South Korea said that supply for the long-term contracts had been secured, while spot cargoes were prioritized to the domestic supply. Therefore, exports would likely be hardly conducted until August onwards depending on the situations for ships arrangements. The price gap between 0.3% sulfur fuel oil, whose prices were soaring due to tight supply/demand fundamentals, and 0.5% sulfur fuel oil, whose prices were weak on the mirror of markets of VLSFO for bunker fuel, was widening on an FOB South Korea basis.