GASOLINE

The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis was unchanged. However, a sense of tight supply emerged. Export volume from China was forecast to sharply decline in July from an expected volume of around 1.30 mil bbl in June, according to sources. China Petroleum & Chemical Corp (Sinopec) reportedly intended to skip exports of July loading petroleum products. This was probably because a series of troubles occurred at its affiliated refineries recently. In addition, as the second export quota for petroleum products was still unclear, export quota for other refineries was said not to be enough at the moment. Furthermore, as Indian refineries switched to imports of gasoline due to troubles of the secondary facility, market sources anticipated that supply might further tighten. Indian Oil Corp Ltd (IOC) carried out a buy tender last week for a total of four MR-size cargoes of 92RON gasoline for delivery in late June to early July.

NAPHTHA

According to a Northeast Asian end-user, the differential for heavy full range naphtha on a CFR Japan basis was at a premium in the low $20's/mt to Japan quotations for high grades and at a premium in the $10's/mt to the quotations for low grades. On the other hand, the differential for light naphtha was unchanged at a low single discount to the quotations. But market sources mentioned that trading levels on a CFR basis were almost hitting bottom. In South Korea, some petrochemical producers were expected to raise operations of naphtha crackers. On the other hand, since crack margins of ethylene over naphtha did not improve, market sources indicated that these players were just consuming naphtha in accordance with high operations of refineries. Market sources reckoned that in South Korea, China and Taiwan, the average operation rates of naphtha crackers were still only about 80% of the capacity.

MIDDLE DISTILLATES

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia fell. A decrease in demand pulled down the market. Steep backwardation was formed between July and August contract in the Singapore paper swap market, end-users tried to avoid the intermonth spreads and refrained from purchasing late July loading cargoes. In addition, persistently high freight costs put downward pressure on the market on an FOB basis. On the demand side, Indian players were moving to buy prompt cargoes. Indian Oil Corp Ltd (IOC) closed a buy tender on Jun 21 for a total of four MR-size cargoes for delivery on Jun 24-27 and Jun 28-30. Further, Bharat Petroleum Corp (BPCL) closed a buy tender on Jun 21 for an MR-size cargo for delivery on Jun 30 to Jul 5.

FUEL OIL

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis fell by an increase in supply. In South Korea, the turnaround period of refineries finished and production of low sulfur fuel oil was expected to be high until autumn, which brought about perceptions of supply glut. In addition, refineries apparently tolerated sales at low prices to obtain demand.