Gasoline: Japan's inactive attitude for imports pushes down SR-size Korea prices

The differentials for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis were unchanged on week. Procurements emerged from Mexico. State-owned Pemex was said to have moved on a purchase of a cargo in Singapore. The trade conflict between the US and Mexico was getting intense for a hike of tariff. However, stocks levels in Singapore were hovering high and it weighed the market prices.

The differential for SR-size cargoes of 91RON gasoline on an FOB South Korea basis declined on weak buying interest from Japan, one of the main buyers of SR-size cargoes from South Korea. Trading houses in Japan were inactive to import cargoes to subdue their inventories as their fiscal year was about to be over at the end of March. Refiners in the country were also in an export position, and supply at home was not tight.

Naphtha: OSN prices firm with expectation that demand for gasoline to increase

The second half March open-spec naphtha prices on a CFR Japan basis were firm with an expectation that supply/demand fundamentals would be tight. Demand as a gasoline raw material was considered to increase in advance. In China, Wanhua Chemical and ExxonMobil were heard to respectively start operations of its new naphtha cracker in March or April. On the supply side, several refineries in Asia and the US started or planned to have regular maintenance.

One South Korean Petrochemical company bought open-spec naphtha for delivery in the second half March at a premium of $5.50/mt to Japan quotations to be assessed 30 days before on a CFR basis via a tender on Feb 12.

YNCC in the country began turnaround at its 915,000mt-per-year No.2 ethylene plant on Feb 10. This maintenance would last until Apr 4.

Middle distillates: High sulfur gasoil prices softer on more sales from Korea and weak demand from SE Asia

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went down. Weak buying interest pushed the prices down. One South Korean oil firm sold one MR-size cargo loading on Mar 7-9 at a discount of 40cts/bbl to the quotations on an FOB basis via a tender. A buyer seemed to transport the cargo to the US. Japanese companies who had been in a short-position were retreating buying interest for March-loading jet fuel and kerosene as their inventories of kerosene seemed to be enough. A market participant pointed out that demand for jet fuel became weaker, so that sellers in the region were increasing sales volumes of high sulfur gasoil instead of jet fuel. However, the differentials fell down in the end this week. Refiners in South Korea sold cargoes loading in March one after another due to sluggish demand at home.

The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis slightly strengthened. Full-fledged discussions on cargoes loading from South Korea, China and Japan had yet to start and buying interest for those from Taiwan was strengthening. In Europe, supply/demand fundamentals were tightening. It was pointed out that the arbitrage window from Singapore to Asia was open, which seemed to supported the market.

The differentials for MR-size cargoes of 0.05% sulfur gasoil on an FOB South Korea basis and an FOB Taiwan basis were falling down. Supply of the grade from Northeast Asia was ample, and market fundamentals were slackening.

In South Korea, one refiner sold an MR-size cargo loading on Mar 25-29 through a tender closed on Thursday at a discount of $2.30/bbl to the quotations on an FOB basis. Refiners in the country were strengthening sales of the traded due to poor demand of gasoil at home and a recent weak tone in the kerosene market.

On the other hand, purchases from Indonesia and Vietnam, main buyers of gasoil in Southeast Asia, were sluggish. One company in Vietnam moved on a sale for a prompt cargo in the spot market.

Fuel oil: 3.5% sulfur markets pushed up by thin sales in Asia

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was remaining at the level equivalent. No new negotiations were witnessed for FOB South Korea cargoes. In Taiwan, Formosa Petrochemical Corp (FPCC) closed a tender Feb 13 to sell an MR-size cargo of 0.5% sulfur straight-run fuel oil for loading in early Mar. FPCC appeared to export surplus cargoes that would be derived from regular maintenance activities for the residual fluid catalytic cracker (RFCC) at its Mailiao refinery from March through April.

Some market players were still focusing on the impacts of the Chinese government decision to reduce the tax rebate on oil products. As a lot of independent refiners in the Shandong Province use fuel for feedstock of their refineries, so that the government decision could lead to narrower profits of the refiners.

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis gained, propelled by less cargoes in the market. Singapore and other trading hubs in Asia saw decreasing cargoes as the US government maintained sanctions against tankers loaded with Russi's crude oil and oil products. Despite the slow demand from shipping and electricity industries, "The market would be dominated by a bullish mood for some time," a source said.

Market News

On February 6th, the South Korean government decided to postpone the measure to reduce the oil tax on refined products such as gasoline and gasoil until the end of April. It had been initially scheduled to be lifted at the end of February, but the government took into account the recent high crude oil prices and measures against high domestic prices. The tax cut rates would remain at 15% for gasoline and 23% for gasoil and LPG. The South Korean government had been implementing the reduction measures since November 2021, and this was the 14th postponement.

The decision to postpone the tax cut measure reduced the likelihood of an immediate increase in domestic prices and a temporary increase in demand before the termination of the policy. As uncertain supply/demand fundamentals were resolved, South Korean oil companies intended to start full-fledge exports of March-loading soon.