Gasoline: Imports to Japan remain unprofitable for high prices in the international market

The differential for SR-size cargoes of 91RON gasoline on an FOB South Korea basis went down. Sellers lowered their offers due to poor buying interest from Japan. Japanese trading houses were unwilling to import cargoes and any discussions seemed to be taking place. In Japan, although domestic supply remained tight on the back of turnaround of some refineries, market players had a hard time looking for cargoes from South Korea due to its unprofitability caused by high gasoline prices in the international market.

Market players were in a wait-and-see stance as exports from China were still unclear. The Chinese government had yet to notify the second export quotas of oil products this, and refiners in the country had a hard time deciding their export schedules in May. Further, Qingming Festival holidays started in the country and market movements were slow.

In South Korea, the government was planning to lift the tax cut policy at the end of April. However, it was rumored that the government would extend the policy again as prices for domestic oil prices hovered high on the back of strong crude oil prices in the international market.

Naphtha: Prices down as sense of oversupply extends

Open-spec naphtha prices on a CFR Japan basis were at a premium of $12.00-13.00/mt to Japan quotations to be assessed 30 days before deliver and at a premium of $9.00-10.00/mt to the quotations on a CFR basis. One petrochemical company in Japan bought 25,000mt of open-spec for deliver in the second half May at a premium below $6.00/mt to the quotations to be assessed 45 days before deliver on a CFR basis via a tender closed on Thursday. It was heard that several sellers had strong selling interest and offered at lower prices than the current market prices. A sense of over supply extended.

The crack spread between naphtha and crude oil was sharply shrinking this week. The naphtha market lacked strength compared to strong crude oil prices. A market participant pointed out that the naphtha market in Asia became soft under the influence that naphtha market in Europe hit the ceiling and turned to go down. Another market participant showed a view that the 650,000 bbl per day Dangote refinery in Nigeria reportedly started to export naphtha and it would probably push down naphtha prices widely. In addition, operation rates of naphtha crackers declined in Northeast Asia and certain amount of LPG was fed as a raw material.

Middle distillates: Jet fuel weakens with arb window to U.S. shut

Jet fuel market weaken. The U.S. jet fuel supply/demand fundamentals were slack, and the arbitrage window from Asia to the U.S. West Coast remained closed. Under the circumstances, a premium of high flash point products over usual cargoes appeared to be shrinking. Rongsheng Petrochemical sold an MR-size cargo for May 1-3 loading through a tender on last Friday. The price was reportedly at a discount of about $1.30/bbl to the quotations on an FOB basis.
The differential for SR-size cargoes of kerosene on an FOB South Korea basis was unchanged. It was heard that Japanese trading houses showed buying interest to South Korean companies. They seemed to check the salable volume in late April and the first half May. However, South Korean companies, who received inquiries from Japan, had no availability to sell cargoes in the spot market, so that no cargoes were heard to be traded at present.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia slightly strengthened on week. Sales volume for cargoes loading in the first half May was limited. Chinese refiners needed to move on sales cautiously for May cargoes as only a small amount of first batch of export quotas was left behind for them. The source prospected that exports in the first half May would be capped in particular. In the market, a view was shown that exports in the first half May would be especially limited. A sense of tight supply surfaced.

Fuel oil: Korea's oil firms bank on bunker fuel market

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was standing at the same level on week. Most players still refrained from walking into a negotiation on FOB South Korea spot cargoes as they maintained their perception about the current market. In the bunker fuel market, very low sulfur oil's (VLSFO) prices drifting at profitable levels for producers in comparison with 0.5%S fuel oil. Thus, South Korean oil companies apparently preferred the bunker market as a sale destination. As previously reported, in China, one of the largest consumers of fuel oil, both of state-own and independent refineries were keen to churn out petroleum products, while the country's buyers showed no interest in securing imported cargoes.

Market News

A magnitude 7.7 earthquake hit Taiwan in the Wednesday morning. According to market sources in Taiwan, Formosa Petrochemicals Co (FPCC) temporarily shut down the operations of some of units at its Mailiao refinery. The company halts operations of some units in case of a huge earthquake. The refinery was already resumed in the after as no impacts were found. Impacts on other refineries in Taiwan and petrochemical facilities had been confirmed.

After the quake, FPCC closed a port at Mailiao.