GASOLINE

The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis increased. The market was boosted by tightness of supply. A decline in freight costs also supported the FOB market. Chinse refineries already consumed most of the first export quota for petroleum products for this year. In addition, volume of new export quota to be allocated by the government was unclear. Therefore, Chinese refineries could not move on sales of June loading cargoes. In South Korea, as domestic demand grew, refineries had very thin room to export June loading spot cargoes. A South Korean refinery was moving to sell an end-June loading MR-size cargo but the deal information was not heard.

Meanwhile, In South Korea, a fire occurred at the No.2 alkylation facility of the Ulsan refinery of S-Oil on Thursday and some facilities including the No.2 residue fluid catalytic cracking (RFCC) were suspended. Because of this, market sources expected that the company might suffer a decrease in production of gasoline by around two MR-size cargoes.

NAPHTHA

In the Northeast Asia spot market, buying interests for July arrival by South Korea end-users were robust. LG Chem closed a buy tender for 225,000-275,000mt arriving on Jul 1-15 on last Wednesday and it was awarded. YNCC issued buy tenders for 25,000mt with a paraffine content at 70% and light naphtha with a paraffine content at 88% loading from the Middle East excluding cargoes from Bahrein arriving in first-half July respectively, and 25,000mt full range grade with a paraffine content at 78% for second-half July delivery as the total for three cargoes. Further, Hanwha Total issued a tender to buy naphtha with a paraffine content at 70% for first-half July delivery with first-half June pricing. A source in Northeast Asia estimated that South Korean end-users as LG Chem was pulling down runs for its naphtha cracker to 80% although they seemed to be seeking naphtha whose prices were relatively reasonable now. In Japan, Asahi Kasei Mitsubishi Chemical Ethylene Corporation (AMEC) issued a buy tender for open-spec grade with a 45-day pricing on last Tuesday, but they withdrew it. However, the company was expected to retender for higher paraffinic naphtha.

MIDDLE DISTILLATES

The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis slid. Amid a bearish outlook along with a backwardation in the paper swap market in Singapore, buying interest in late June loading was thin. On the other hand, refineries maintained sales volume of gasoil due to its profitability. Supply/demand fundamentals slackened and the market was on the decline. South Korean refineries continued sales. SK Energy sold a Jun 20-22 loading cargo in a tender at a premium of $2.80/bbl to Singapore quotations. SK Energy also carried out a sell tender for a Jun 9-11 loading cargo.

FUEL OIL

The differential for MR-size cargoes of 0.3% sulfur fuel oil on an FOB South Korea basis was unchanged. In South Korea, prices of VLSFO for bunker were soaring up and the prices were conducting higher by over $200/mt than those of 0.5% sulfur fuel oil as the feedstock on an FOB South Korea basis. On the back of that, it was cited that SK Energy, the biggest supplier of VLSFO in the country, was tightening the supply due to turnaround. In reaction to this, South Korean oil companies seemed to be losing the incentive of sales for low sulfur fuel oil cargoes whose prices were relatively cheaper than VLSFO. In Japan, in addition to Tohoku Electric Power Company as reported earlier, a Japanese market player reported that several power companies were showing buying interest for 0.3% sulfur fuel oil as the alternative of liquefied natural gas (LNG). However, the market player pointed out that actual requirements would likely be in July or August when the temperatures will go up really in summer.