GASOLINE

The differentials for MR-size cargoes of gasoline on an FOB Northeast Asia basis weakened on higher freight rates. Freight rates for MR-size cargoes between Singapore and South Korea were over $5.00/bbl. In the Singapore paper swaps market, the timing spread between July and August contracts was in the low $5's/bbl in favor of July, so that traders were reluctant to buy cargoes. In South Korea, some refines had started talks on cargoes loading in July.

The differential for SR-size cargoes of 91RON gasoline on an FOB South Korea basis edged down. Buying from Japan, a major destination of cargoes, was weak. In Japan, supply was tight. But as imports were unprofitable, players including Japanese traders did not raise purchase prices. As reported, ENEOS, which was suffering troubles at its 145,000b/d Sendai refinery, found it difficult to procure in the domestic market and was looking for imported cargoes. While upside of the market was curbed with subsidy in Japan, imports were unprofitable with the overseas market and freight costs high.

NAPHTHA

In the Northeast Asian spot market, the difference in prices tended to widen depending on grades. Japan's Showa Denko reportedly procured second-half July delivery open-spec naphtha at a discount of $6-9/mt to Japan quotations in a tender. More than 10 sellers participated in the tender. Market sources indicate that some offers were below the expected prices and deal levels declined. A strong sense of supply glut was also observed. Meanwhile, South Korea's GS Caltex was said to have procured second-half July delivery heavy full range naphtha at a premium of $16-18/mt to Japan quotations. Northeast Asian market sources pointed out that while prices for open-spec and light naphtha declined to negative to Japan quotations along with the low olefin market, prices for heavy full range naphtha, base material of gasoline, moved up on the back of the firm gasoline market.

MIDDLE DISTILLATES

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia fell. With freight costs remaining high, a premium on an FOB basis slipped. Furthermore, as a backwardation was formed in the Singapore paper swap market, a bearish outlook also pulled down the market. Among Japanese players, Cosmo Oil sold a cargo. In Japan, ENEOS and Idemitsu had available cargoes too. South Korean refineries also started sales of July loading.

The differential for MR-size cargoes of 0.05% sulfur gasoil on an FOB Northeast Asia basis fall. Buying interest from Southeast Asia including Vietnam was thin. In coastal areas of China, requests for fishing boats was limited during the ongoing summer fishing ban period. The market was capped by low demand.

FUEL OIL

The differential for MR-size cargoes of 0.3% sulfur fuel oil on an FOB South Korea basis was unchanged. But supply/demand fundamentals were expected to slacken. In South Korea, turnround at refineries finished and supply room was recovering. Meanwhile, in South Korea and Japan, it rains a lot and temperatures are low recently. As a result, power demand was limited. In addition, the Japanese government was expected to request summer power restrictions in the days ahead. Furthermore, as prices for liquified natural gas (LNG) were declining, alternative demand for fuel oil for power generation might not emerge. In Taiwan, refineries were giving priority to production of middle distillates due to its favorable refining margins. CPC Corp did not plan to float sell tenders for low sulfur fuel oil at the moment.