Gasoline: Non-oxy prices up on expected limited supply, but oxy prices capped on retreating demand
The differential for MR-size cargos of 91RON gasoline on an FOB South Korea basis and the differential of 93RON gasoline on an FOB Taiwan basis both went up sharply. Buying interest was strengthening while supply was expected to decline. Refiners in Northeast Asia were expected to curtail their exports toward the summer demand season. CPC Co in Taiwan sold an MR-size cargo of non-oxy grade 95RON gasoline loading in early June through a tender in late April at a premium of $8.50/bbl to the quotations on an FOB basis. Based on the deal, it was reported that a usually 93RON gasoline loading in Taiwan could be traded at a premium of around $4.50/bbl to the quotations on an FOB basis.

On the other hand, the differential for MR-size cargos of 92RON gasoline on an FOB South Korea basis and the differential of 92RON gasoline on an FOB China basis were capped due to sluggish demand. Purchases for cargoes from Southeast Asia including Indonesia and Vietnam were poor. In Vietnam, the 145,000b/d Dung Quat refinery seemed to resume operations after turnaround and imports of gasoline into the country were expected to decline going forward. Although the arbitrage window for cargoes from Asia to the US West Coast remained open, buying interest for cargoes for Mexico was not strong. Gasoline prices in the US were also softening as inventories were building up after some refineries were back online from maintenance activities. Thus, Buyers who wished to bring cargoes to Mexico were possibly going to fucus on buying cargoes from the US.

Naphtha: Premium hovering higher and markets see the US gasoline prices

Open-spec naphtha prices on a CFR Japan basis strengthened from a week before. Two South Korean petrochemical companies bought naphtha for delivery in the second half June at a premium of around $11.00/mt to the quotations on a CFR basis via a tender separately. Although the awarded prices were lower than the current paper swap values as a part of seller had strong selling interest, there was no sign that the market prices would decline. A market participant said that there was no surprising factor which had impacts on supply/demand fundamentals and the market prices would be supported as well.

In the meantime, in South Korea, cargoes of heavy full range naphtha C grade were traded at a premium of $15.00-16.00/mt to the quotations on a CFR basis via tenders. Markets were paying attention to the US gasoline market.

Middle distillates: Shrinking refining margins lead CDU's operation rates down

The differential for MR-size cargoes of jet fuel on an FOB South Korea basis remained at same price compared to late last week. Several market participants who were dealing with MR-size cargoes in South Korea pointed out that a tradable price for an MR-cargo loading in early June from the country could be at a discount of around $1.00/bbl to the quotations. Many traders were feeling that inventories in Singapore were ample, and their buying interest was weak. On the other hand, the differential on an FOB Taiwan basis become higher on week. From some viewpoints such as the freight rates, deals of Taiwanese cargoes were currently being done at higher prices than those from other countries in the region.

Japan's renewable energy firm Euglena and Japan Airport Terminal Co. announced that they had reached an agreement to start consideration for supply-chain establishment for sustainable aviation fuel (SAF) at Haneda Airport. They are targeting to set up the supply-chain of SAF of 50,000kl per year.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis slightly went up. Buyers showed their buying interest for June-loading cargoes from Taiwan, which was pushing up the market slightly higher. CPC Corp sold 450,000bbl for June 1-22 loading at a discount of about 80cts/bbl to the quotations on an FOB basis through a tender closed on Monday. Considering the freight rates, there was a price gap of about 40cts/bbl between the price for LR-1 size cargoes and MR-size cargoes.

In South Korea, GS Caltex had lowered its refinery operation rates by about 30,000b/d amid shrinking crack margins of middle distillates, which might affect sales in the spot market.

Fuel oil: Europe's HSFO possibly flows into Asia

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis was stable in the same level. Some market participants expected the market to turn soft going forward. In Europe, players including oil majors were believed to charter a Suezmax tanker bound for Asia amid stagnant local demand for high sulfur fuel oil (HSFO). On the other hand, Asia saw less cargoes shipped from the Middle East and Northeast Asia in these days, leading to a drop in the inventories of Singapore. Asia's HSFO market was drifting on a firm tone, but "The current solidness would fade away if more cargoes are brought to Asia from Europe," said a person familiar with the matter.

Market News

The Chinese government notified the second batch export quotas of refined products in 2024 to state-owned oil companies by Tuesday. According to market sources, the total volume of oil products was 14.00mil mt, up 55.6% from 9.00mil on year; among them was 12.20mil mt for general trades and 1.80mil mt for processing trades.

For low sulfur fuel oil (LSFO), the government notified 4.00mil mt, up 33.3% from 3.00 mil mt on year.

In the first batch of quotas for 2024, 19.00 mil mt was allocated for oil products and 8.00 mil mt for LSFO, respectively.