Gasoline: Chinese refiners start sales of Mar cargoes

The differentials for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis were unchanged on week. Exports from Northeast Asia in March were expected to increase. However, a hike in exports was unlikely so huge due to some regular maintenance activities of refineries in the region in March onward. As reported before, demand in South Korea was sluggish, and refiners were focusing on exports of the fuel. GS Caltex issued a tender to sell an MR-size cargo loading on Mar 16-20 and 150,000bbl loading on Mar 21-25. The company had sold two MR-size cargoes loading on Mar 9-13 and Mar 26-30.

　　Refiners in China had almost fixed their export plans in March, and moving to sell spot cargoes. PetroChina, one of the main sellers of the fuel in the country seemed to be planning to sell around 300,000mt in the month. This, the company moved to sell cargoes loading in March. Sinochem also moved on a sale of an MR-size cargo of 92RON gasoline loading in mid-March. Exports from Japan could decline in the month due to some troubles at ENEOS's refineries. The company was likely to receive an MR-size cargo of gasoline to its Sakai refinery in late February from South Korea.

Naphtha: Zhenhai refinery shutting down new CDU

The first half April open-spec naphtha prices on a CFR Japan basis were unchanged on week.

No sign emerged that the operation rates of naphtha crackers would rise in Japan, South Korea, Taiwan and Southeast Asia. A part of companies was considering to reduce the operation rates from March. Demand for existing naphtha crackers remained weak.

According to a South Korean petrochemical company, it remained hard for petrochemical companies to raise the operation rates because demand for derivatives of ethylene did not increase if the price gap between naphtha and ethylene would widen. Another company in South Korea was considering to decrease the operation rates of its naphtha cracker from March by more than 10% points compared to February. In Southeast Asia, several naphtha crackers continued to shut down operations due to narrower profits.

Slow demand for petrochemicals was considered to be one of the bearish factors although turnaround of refineries was expected to decrease supply and demand for naphtha as a gasoline raw material would increase.

In China, The Zhenhai Refining & Chemical, under the Sinopec group, was shutting down its No.5 crude distillation unit as of Feb 20 at the refinery in Zhejiang. The company constructed the No.5 CDU last year and fed crude oil into it in December. The trial runs started on January 5 but a fire occurred on Jan 7. According to a source, it was unclear when the unit would come back.

Middle distillates: 10ppm markets down, SK sells late Mar cargo

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went down. The arbitrage window from Asia to the U.S. and Europe closed, and supply/demand fundamentals within Asia were slack. In South Korea, S-Oil sold a total of two MR-size cargoes loading on Mar 23-25 and 29-31 through a tender.

No fresh sales were seen in Taiwan. At the start of the March loading negotiations, the South Korean refiners had been slow to start sales of cargoes, and traders who were in a hurry to buy cargoes procured cargoes from Taiwan cargo at a high premium. However, the current ample supply from South Korea was cutting the prices on an FOB Taiwan basis.

The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB North East Asia were falling down. Cargoes from the Middle East and India were increasing and were competing with those from Northeast Asia for demand. SK Energy in South Korea sold one MR-size cargo loading on Mar 20-22 with a private negotiation. A market participant said that the refiner recently shifted their sales to private negotiations instead of open-tenders. According to a South Korea-based market source, domestic prices were expected to go down due to a slump in oil products sales and falling crude oil prices. Because of this, retailers did not prioritize to secure stocks of products from oil firms and the domestic market was being buyers' one.

Fuel oil: Singapore targeted by surplus 0.5%S FO amid poor demand

　　The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. A South Korea's oil firm was believed to sell one MR-size cargo of 0.5%S fuel oil for loading in March. The cargo would apparently be shipped to Singapore. With sluggish demand, players were apt to bring surplus cargoes to Singapore, the largest trading hub in Asia, in order to adjust inventories for the time being, an industry source pointed out. Residual oil inventories were gradually increasing in Singapore.

Independent oil refineries significantly decreased their import volumes regarding fuel oil in China, where the government cut value added tax (VAT) refund for exporting oil products. Some independents were already forced to halt their operations, making gradually an impact on China's supply-demand balance. A market participant anticipated that more refineries might be shut down going forward.