Gasoline: Indonesia maximizes its receipts of term cargoes

The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis stayed in the same level on week. Supply from Northeast Asia was unlikely to increase as gasoline refining margins remained poor.

In South Korea, refiners seemed to be producing more gasoline in November from October to secure domestic supply. In the country, domestic prices kept falling, and demand was increasing, so that supply/demand fundamentals were getting tight.

Meanwhile, demand in Southeast Asia including Indonesia, the largest buyer of the fuel in the region, seemed to remain stable. A trader pointed out that state-owned Pertamina had maximized its receipts of term cargoes.

Naphtha: Premium up on decreasing supply from refineries

Talks on cargoes for delivery in the second half November started. One Japanese petrochemical company bought 25,000mt of open-spec naphtha at a premium below $4.00/mt to the quotations to be assessed 45 days before on a CFR basis via a tender closed on Oct 1. It was pointed out that supply from refineries was considered to decrease and it supported the market prices. In the spot market, two companies in Taiwan and Indonesia were heard to try to buy cargoes.

On the other hand, other companies in Japan and South Korea did not move on procurements. A market sources said that wait-and-see mood was prevailing because naphtha prices were going up.

The operation rates of naphtha crackers did not rise. In South Korea, at least three companies cut the running rates in October. In the meantime, demand for naphtha as a gasoline raw material was retreating as well as the gasoline demand season almost ended.

Middle distillates: Kerosene market up for increasing demand from Japan

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis did not change. However, the market prices on an FOB basis were capped. Although selling interest was strong from China, the arbitrage window to other regions did not widen and inquiries were limited.

The US Energy Information Agency announced on Sep 30 that the annual production capacity of ethanol in July in the country was 18.37 gallons (1 gallon=3.8 liter), up 104 mil gallons on month and up 600 mil gallons on year. In the country, demand of bio-related fuels including sustainable aviation fuel (SAF) is increasing and expansion of production capacity of ethanol as a raw material of biofuels seems to continue.

The differential for SR-size cargoes of kerosene on an FOB South Korea went up. Buying inquiries from Japan were on the rise ahead of the winter demand season. South Korean oil companies offered for a November-loading SR-size cargo at a premium of $3.00-3.50/bbl to the quotations on an FOB basis. Several Japanese trading houses and refiners were keen to buy the cargo with strong import profitability. In this circumstance, some traders pointed out that the cargo could also be done at a premium of around $3.00/bbl to the quotations on an FOB basis.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis went down. Freight rates were rising and it seemed to push down prices on an FOB basis. The arbitrage window to Europe did not widen enough although the gasoil market in the region became stronger because the maintenance season of refineries started. Thus, it was pointed out for refiners to remain hard to send cargoes from Asia to Europe. In this situation, one European trader sold one MR-size cargo loading in South Korea on Oct 25-27 at a discount of $1.25/bbl to the quotations on an FOB South Korea basis. According to a source, this trader seemed to have planned to transport the cargo to Australia, but probably decided to resell it as the freight rates recently increased.

Fuel oil: LSFO prices slide amid loosening supply-demand balance

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis weakened, propelled by the expectation that Asia's supply-demand balance would slacken. The current fair differential for MR-size 0.5% sulfur fuel oil cargoes stood at a discount of about $40/mt to the quotations in talks on a FOB South Korea basis, according to an industry source. Another market player considered low $40's/mt as reasonable discount levels to the quotations. Some oil firms seemed to rump up productions of low sulfur fuel oil (LSFO) in Asia with solid refining margins. Furthermore, China's 0.5% sulfur fuel demand was anticipated to taper off sometime soon.