Gasoline: Refining margins sharply worsening

The differential for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis were in a weak tone. Market sentiment remained weak as a sense of oversupply had yet to be wiped out. As the winter heating oil demand season continues in Japan and South Korea, and refiners in the countries kept the operation rates of their refineries high to produce kerosene. Therefore, productions of gasoline were also ample, and more gasoline were exported. Exports of the fuel in February from China were forecast to be at around 700,000mt. In addition, supply from the Middle East and India was ample, and inventories in Singapore hovered at a high level.

Naphtha: Prices for full range weigh with enough supply

　The open-spec naphtha prices on a CFR Japan basis went down on weaker demand. Due to soft market sentiment of derivatives, it was one of the reasons for petrochemical companies to cap the operation rates of naphtha crackers. In China, a part of petrochemical companies recently decreased productions volumes of derivatives of ethylene that had poor profits. In Japan, the average operation rates of naphtha crackers were 78.7% in December.

The first half March heavy grade naphtha prices on a CFR Japan basis were unchanged. Indonesia state-owned Pertamina conducted a buy tender for 22,000-33,000mt of heavy full range naphtha for delivery to Tuban for TPPI on Mar 13-15 by Jan 24. Pertamina bought 33,000mt. The company also conducted a buy tender for condensate for delivery to Tuban on Mar 16-25 and closed it on Jan 20. An information was heard that the company seemed to procure North West Shelf Condensate (NWSC) via a trader.

Market sentiment for condensate produced in the Middle East and Australia stayed firm. It was hard to procure condensate produced in Russia due to sanctions and alternative demand emerged for those regions. According to a market participant, Russian energy companies were domestically using more condensate instead of exports but had a policy to export oil products especially naphtha.

Middle distillates: Jet supply/demand slackens with inquiries to Japan peaking out

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia weakened. Amid weak buying interest, supply/demand fundamentals were eased due to brisk sales from China. In China, Rongsheng Petrochemicals sold one MR-size cargo loading on Feb 25-27 through a tender The result was not clear. However, it was noted that market participants negotiated at a deep discount. Japanese oil companies had shown strong buying interest in the cargo as kerosene specs until January loading, but they might restrain their buying now as they were aware that the kerosene demand season was peaking out.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB North East Asia went up.

Sinking freight rates were pointed out to push the prices up. In the meantime, a market source mentioned that supply from India tended to decrease. ENEOS in Japan sold on MR-size cargo loading in the two ports of Mizushima and Sendai in mid-February at a discount of $1.1/bbl to the quotations on an FOB basis on Friday. This cargo was heard to be transported to New Zealand.

Fuel oil: HSFO market weakens on prospect of slowing demand

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis was broadening out. The market softened on weak demand outlook. Although it was difficult to secure fuel oil from Russia, it was said that demand in China was declining. China hiked the import tax for fuel oil to 3% from 1% this month, discouraging independent refineries from purchasing fuel oil as feedstock for their plant. Some market participants were interested in the fate of the excess inventories of fuel oil.