Gasoline: Inquiries for Korea SR-size cargoes still weak

The differential for MR-size cargos of gasoline stayed in the same level on week. In the spot markets, only GS Caltex in South Korea conducted a sell tender for the fuel loading in mid-May.

The differential for SR-size cargoes of 91RON gasoline on an FOB South Korea basis was unchanged. According to a South Korean company, there was no inquiry from Japan. There was no factor that would make Japanese trading houses active to import cargoes. Inventories for the fuel were domestically not short. In addition, the Japanese government was reported to consider to increase subsidy for the fuel from June, so that the retail prices were prospected to go down in the month. Thus, demand for end-users was expected not to increase in May.

Naphtha: Part of end-users expected to promote uses of LPG

The second half May open-spec naphtha prices on a CFR Japan basis went down with concerns about decreasing demand for petrochemical products with an economic slowdown caused by the US-China trade frictions. Supply was expected to increase as turnaround would finish at some refineries soon.

On the other hand, the switch of feedstock from naphtha to LPG was also expected to be promoted due to a sharp drop in LPG markets in a part of counties. A market participant said that it was easy for petrochemical companies to shift their feedstocks to LPG instead of naphtha if aromatics markets would remain soft. It was pointed out to be one bearish factor that markets for gasoline currently lacked strength.

However, some market participants believed that demand for naphtha would probably increase in China. Prices for imported propane and ethane to China from the US would rise in advance due to additional tariffs. It would lead profits of propane dehydrogenation (PDH) units and ethane crackers in China poor and the operation rates of them were expected to decline. Naphtha crackers' competitiveness might improve.

In this situation, GS Caltex in South Korea bought two 25,000mt of heavy full range naphtha C grade. The awarded price for the one for delivery in the second half May was at a premium of $5.00/mt to Japan quotations on a CFR basis.

Middle distillates: Demand for Australia recovering

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis was unchanged. A wait-and-see mood remained in the Asian market. Crude oil prices fluctuated as U.S. tariff measures were uncertain. Many traders were curbing their sales to observe the situation. In the meantime, GS Caltex in South Korea was moving to sell an MR-size cargo for early May loading through a private negotiation.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis increased. Amid limited cargoes loading in May, buyers who wished to procure cargoes earlier were likely to have bought them. As reported before, it was also perceived to be a bullish factor that demand in Australia was coming back.

Fuel oil: More arb cargoes push 3.5%S markets on FOB Korea down

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB South Korea basis weakened with a fall in the 380cst fuel oil prices in Singapore. The arbitrage cargoes were arriving in Asia as prices in Asia especially in Singapore had earlier strengthened. Thus, supply in Asia was increasing and the market tone in the region was retreating.

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. The market price was capped by a sense of oversupply. Although Singapore inventories fell slightly due to decreasing arbitrage cargo arrivals in April, inventories remained high and supply in the Asia region remained ample.