Gasoline: JPN trading houses reluctant to import mogas as domestic supply recovers
The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis was unchanged on week. However, sluggish demand capped upward momentum in the market. Spot purchases from Southeast Asia were poor as refiners in the region had almost finished regular maintenance activities of their refineries. Meanwhile, in the Singapore paper swaps market, the timing spread between Jun/Jul contract narrowed to 40cts/bbl in favor of June. In Northeast Asia, refiners in China started sales of cargoes loading in June, but no actual deals had yet to surface. In the country, PetroChina sold extra cargoes loading in May, and total sales volumes from the country in May added up to 1.00mil mt.

In the trade of May cargoes, Mexico's Pemex bought three MR-size cargoes loading in China from the end of May to June. In addition, the company procured several cargoes loading in Singapore in late May. The cargoes in Singapore were said to be traded at a discount of 20cts/bbl to the US gasoline quotations (RBOB) on an FOB basis. Rongsheng Petrochemical recently sold an MR-size cargo of alkylate loading in June at a premium of $15.00-16.00/bbl to Singapore quotations.

The differential for SR-size cargoes of 91RON gasoline on an FOB South Korea basis went down as buying interest from Japan, one of the main buyers of the fuel for South Korean products, was retreating. With gasoline prices in the international market staying low, import costs of gasoline from South Korea stayed lower than the domestic prices in Japan. However, domestic supply in the country was increasing as refineries' troubles were getting eased and trading houses were unwilling to import cargoes as their shipments to the market were delayed. In the spot market, a refiner in South Korea sold a cargo loading in late June to Japan at a premium in the low $3's/bbl to the quotations on an FOB basis. Another South Korean seller was reportedly considering to move on sales of cargoes loading in late June at a premium in the low $3's/bbl to the quotations.

Naphtha: Demand expected to return from LPG

Open-spec naphtha prices on a CFR Japan basis showed no changes amid mixed bullish and bearish factors.

Refining volume of naphtha was decreasing because of declining operation rates of crude distillation units, it was said. In addition, a view was extending that demand for naphtha would return from LPG because the price spreads between the two fuels were going to shrink. The price for propane had been low, so that demand and the operation rates of propane dehydrogenation units (PDH) were rising. Reflecting it, the propane price rebounded. The price for butane was also rising in line with that for propane. An expectation supported the butane price that supply from the Middle East would be cut.

However, it was probable that consumption volume of naphtha would decrease going forward. According to a source, ethylene cargoes were transported from other region and propylene stocks were enough due to rising running rates of PDH. The prices for both petrochemical products were capped and profitability of naphtha crackers had yet to recover.

Formosa Petrochemical Corp (FPCC) started maintenance activities at its No.1 naphtha cracker on May 22. The maintenance was scheduled to last until the end of July. JG Sumit in the Philippines had restarted operation of its naphtha cracker, which shut down on May 9 due to some glitches.

Middle distillates: Jet fuel market up as supply temporally tightens

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia increased. Sales volume didn't increase at present. According to a source, only S-Oil had promoted sales in South Korea and the other refiners in the country were inactive with sales for June cargoes. SK Energy moved on selling about two cargoes and GS Caltex seemed to sell no cargoes at present, it was mentioned. In the meantime, Chinese refiners had yet to increase sales volume for June cargoes. The market source pointed out that cargoes loading in the first half June were significantly few and a sense of tight supply temporarily emerged although the arbitrage window for other regions remained narrow. In addition, contango was formed in the Singapore futures market, so that buying interest for cargoes loading in the second half June tended to rise.

The project to construct a new sustainable aviation fuel (SAF) production unit is ongoing at Cosmo Oil's Sakai refinery in Japan. The construction is scheduled to start in November or December this year and to acquire the necessary certification in spring next year. Full-fledged operations are expected to start after the acquisition. That plant will be the country's first large-scale SAF production facility and SAFFAIRE SKY ENERGY, the joint venture of JGC Holdings, Cosmo Oil and REVO International, will operate it. Its annual production capacity is planned at 30,000kl.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia slightly weakened. Actual demand within the Asia region was not strong due to the economic slowdown. In addition, Australia, one of the major buyers of gasoil, was curbing its purchases as the winter season was approaching. On the other hand, South Korean and Chinese oil companies were planning to sell a certain volume of June-loading products. Supply/demand balance was also slacking as the Middle Eastern and Indian products continued to flow into Asia.

Fuel oil: First LSSR cargo from Dangote refinery arrives in EU

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was mired in the level equaling to May 17. The market underlying note was firm amid excessive supply worries ongoingly receding.

On the other market front, Europe received its first cargo of low sulfur straight run fuel oil (LSSR) shipped from Nigeria's 650,000 barrel-per-day Dangote refinery, which began operating commercially this year. The LSSR appeared to be used as a base material for marine VLSFO (very low sulfur fuel oil). The African largest refinery is producing petroleum products including gasoil. Some players believed that the refinery would also export more fuel oil going forward.

Market News

South Korean major refiner Hyundai Oilbank will supply a total 7.20 mil barrels of 0.001% sulfur gasoil to Guam Power Authority (GPA) for three years from this year. It is based on the environmental measure of the local government of the island. GPA will gradually replace fuel oil with 0.001% sulfur gasoil as fuels for power generation in order to reduce emissions of CO2. Hyundai secured the outlet of its gasoil exports.