Gasoline: Non-oxy grade prices sharply fall on sluggish 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 sharply went down. The differentials dipped on sluggish demand. On the demand side, imports in Australia, one of the main destinations of non-oxy grade gasoline, were declining toward winter. Also, buying interest for cargoes to the US West Coast was also retreating. Supply in the country seemed to be increasing as the operation rates of refineries in the US were on the rise.

Purchases from Southeast Asia were slow as supply in Indonesia and Vietnam was increasing as turnaround of refineries were over in addition to the strong US dollars against most other currencies.

Naphtha: Market prices slide with balanced fundamentals

Open-spec naphtha prices on a CFR Japan basis were unchanged on week. Supply/demand fundamentals were balanced. Demand for naphtha was pointed out to return from LPG due to the narrower price spread between them. One Taiwanese company had a will to use naphtha more than LPG going forward.

On the other hand, naphtha prices were capped as gasoline markets were getting softer. A view was shown that demand for gasoline in the US would unlikely to increase as expected earlier although the summer driving season this year had started. A part of companies was heard to increase the use of condensate and decrease the use of naphtha as the prices for condensate declined on weak middle distillates markets.

One Japanese petrochemical company bought 25,000mt of open-spec naphtha for delivery in the second half July at a premium of low- $4's/mt to the quotations to be assessed 45 days before on a CFR basis via a tender closed on Monday.

Middle distillates: Arb to EU remains close in GO markets

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Aasia basis were staying in the same level. It was reported that the arbitrage window from the region to the US remained narrow. In the country, some troubles were reportedly happening at secondary units at several refineries, but that had only small impacts on refineries operations. Due to high operation rates of refineries and enough supply, jet fuel market prices were capped in the country. In the meantime, freight rates of MR-size vessels were rising, so that the tradable prices for MR-size cargoes tended to be weighed.

The International Air Transport Association (IATA) announced on Jun 2 that it projected that the production of sustainable aviation fuel (SAF) in 2024 would reach 1.5 mil mt. This is a significant increase, approximately three times from 2023, but it still accounts for only 0.53% of total aviation fuel demand across the globe. According to IATA Director General Willie Walsh, 140 projects with SAF production capacity are expected to begin production by 2030. If these projects produce as announced, the total production of biofuels will reach 51 mil mt by 2030, which would make renewable fuels available to use of the world.

The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis declined on loose supply/demand fundamentals. The European market remained weak, and the arbitrage window from Asia to Europe stayed closed partly due to rising freight rates for LR2-size vessels. Demand in the region was also sluggish, and upside of the market capped.

In Taiwan, Formosa Petrochemicals Co proceeded sales in the spot market including 750,000bbl for Jun 25-29 loading, and an LR2 size cargo and an MR cargo for late June to mid-July loading, respectively. The company decided to sell a large volume in order to reduce inventories. However, the profitability of middle distillates in the international market was poor, and the company was expected to adjust supply/demand balance by reducing refinery operation rates.

In the Singapore futures market, regrade, which showed the price spread between jet fuel and 0.001% sulfur gasoil, was shrinking. As of Jun 6, regrade was at minus $1.10/bbl. The gasoil market prices declined on sluggish supply/demand fundamentals. Considering to refining margins, it was more profitable to refine jet fuel rather than high sulfur gasoil.

Fuel oil: FOB NE Asia 3.5% sulfur market moves up amid persistent tight supply

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis weakened amid low demand. In China, one of South Korea's main consumers, shipping companies suffered a lack of appetite for low sulfur fuel oil (LSFO) resulting from a weakened economy, as previously reported. Thus, few players were apparently interested in FOB South Korea cargoes.

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis slightly strengthened, driven by tighter supply-demand balances in Asia. The Asia market recently saw decreasing cargoes of high sulfur fuel oil (HSFO) shipped from the Middle East and Europe, as previously reported. On the other hand, marine demand for HSFO was gradually recovering in Asia, a player pointed out.