Gasoline: Purchases surface from Japan

The differentials for non-oxy grade gasoline shot up on expectations that demand would increase. Procurements of cargoes for the US West Coast were possibly going to increase as the arbitrage window for cargoes to the area remained open. In addition, import demand to Japan was surfacing as some troubles of refineries had taken place in the country. Last Tuesday, Formosa Petrochemical Co (FPCC) sold two 250,000bbl cargoes of 93RON gasoline loading on Aug 14-18 and Aug 18-22 via a tender. The first one was traded by Idemitsu Kosan. PetroChina seemed to have sold an MR-size cargo of 92RON gasoline loading in Chiba, Japan, on Aug 3-5. Idemitsu Kosan. Before the deal, the Japanese refiner was likely to have moved on purchases of cargoes loading from the end of July till early August. As mentioned above, some refineries troubles happened in the country, and restarts of other refineries were delayed. Thus, export cargoes from refiners in Japan were quite limited.

Naphtha: Bullish and bearish factors mixed for 1h Sep markets

Open-spec naphtha prices on a CFR Japan basis went down. Weak demand for cargoes for delivery in the second half August pushed down the market prices. According to sources, procurements for the second half August from South Korea were fewer than for the first half August. Japanese petrochemical companies had weak buying interest as they had secured cargoes with term contracts in advance.

Regarding to markets of the first half September, both bullish and bearish factors were mixed. On the supply side, a part of countries in the Middle East reportedly reduced crude throughput and supply would probably decrease. On the other hand, it was hard to increase the operation rates of naphtha crackers and demand for naphtha as petrochemical raw materials was expected to be subdued. In addition, demand as a gasoline raw material was also prospected to decrease as the gasoline demand season was coming to an end in September, it was pointed out.

Middle distillates: Jet fuel price went down with scarce buying interest

The market was weak due to a lack of buying interest. In China, Rongsheng Petrochemicals sold one MR-size cargo for Aug 3-5 loading this week. This cargo was traded at a slightly higher price than usual cargoes due to its high flash point and low sulfur content. However, the arbitrage window from Aisa to the U.S. West Coast remained closed, and high-specification cargoes were unlikely to be sold at a premium compared to usual ones. Another bearish factor was that demand in the major destinations such as Australia and Hong Kong was filled with the large volumes of Chinese products that was sold for the end of July. In South Korea, SK Energy sold one MR-size cargo for Aug 3-5 loading.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis went up. Declining freight rates for MR-size vessels were pointed out to push down the market prices. According to sources, VLCC was recently used alternatively to transport oil products and it might make supply/demand fundamentals of tankers loose. In the meantime, some refineries in Northeast Asia continued to decrease the operation rates and several glitches happened at refineries. Production volume was going to be optimized and it would support the prices, it was also heard.

Fuel oil: Sentiment gets bearish on ample non-Asia's cargoes

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis went down. Concerns about excessive supply of low sulfur fuel oil (LSFO) seemed to remain in Asia such as in Singapore. The state-owned Kuwait Petroleum Co apparently sold 130,000/mt of very low sulfur fuel oil (VLSFO) for loading in late-July through a tender, according to a market participant familiar with the matter. The differential for the cargo on an FOB Kuwait basis was reportedly at a discount of approximately $8/mt to the quotations on an FOB basis. BB Energy purportedly was the winner of the tender.

The price for VLSFO in Tokyo Bay was sharply up as supply/demand fundamentals tightened. On last Tuesday, ENEOS and Cosmo Oil stopped accepting new orders for delivery in July. ENEOS shut down the operations of the residue desulfurization unit (RDS) at the Sendai and Kashima refinery and had a glitch at the Negishi refinery. The refiner did not accept additional orders in order to avoid congested shipping berths at the Chiba refinery as one of the loading arms had a trouble. The refiner domestically did not accept fresh orders with term contracts and in the spot market. Cosmo Oil was expected to delay to resume its No,1 crude distillation unit (CDU) at the Chiba refinery in late July, while the refiner had restarted the No.2 CDU at the refinery on Jun 25. In addition, Showa Yokkaichi Sekiyu restricted supply from the Yokkaichi refinery due to a gas leak that occurred in Jun. Demand was increasing for Cosmo Oil's Yokkaichi refinery, and as a result, Cosmo Oil ended sales for Jul cargoes earlier. At present, trading houses and traders needed to raise their offer level as they were able to sell cargoes with sales quotas only from Idemistu Kosan's Chiba refinery.