Gasoline: Weaker buying interest by PEMEX perceived bearish factor

Non-oxy gasoline markets were stable in Northeast Asia. In the market, it was pointed out that buying interest by Mexico's state-owned Pemex was retreating, and it was perceived to be a bearish factor for the market. The company had bought 8-10 MR-size cargoes loading in April and four to five cargoes loading in May, but was disappearing from the Asian market after since then.

Market sources were focusing on the announcement by the Indonesian government that the country would increase procurements of gasoline from the US and the Middle East instead of Singapore. However, it was viewed that it was not realistic to buy cargoes from the US in the view of freight rates.

Naphtha: New ethylene unit to start operations soon in Indonesia

Trading of the first half July open-spec naphtha was in full-fledged. Buying interest by Chinese end-users was expected to retreat and it capped the market prices compared to those for the second half June-delivery cargoes. On the other hand, a part of market participants said that there was certain demand in the spot market, so that the market was unlikely to keep falling. LG Chem in South Korea bought 25,000mt each for delivery in the second half June and the second half July. Mitsubishi Chemical in Japan conducted a buy tender for open-spec for delivery in the first half July.

One South Korean petrochemical company was heard to decide to reduce the average operation rates of its naphtha crackers to 85% in June from 90% because sales for derivative polyolefin did not increase and it was hard to increase sales for ethylene. The company had been running its crackers at 90% since January. In Indonesia, Lotte Chemical Indonesia would start operations of its new naphtha cracker next week. On the other hand, PRefChem in Malaysia was expected to delay restart of its naphtha cracker to mid-June. Some sources reported it. PRefChem was said to have targeted to restart it within May.

Middle distillates: 10ppm gasoil prices keep falling on strong selling pressures

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis strengthened. With sales of June cargoes limited from Northeast Asia, buying interest for cargoes loading in early to mid-June seemed to be strengthening for short-covering. In China, Rongshan Petrochemical sold an MR-size cargo loading on Jun 5-7 via a tender. In South Korea, SK Energy had some cargoes for sale loading in June, and was moving to sell them with private negotiations. Another refiner in the country was also moving to sell an MR-size cargo loading in early June. As reported, GS Caltex was selling two MR-size cargoes loading on Jun 9-13 and Jun 20-24 via a tender

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB South Korea basis was weakening on strong selling pressures. A South Korean refiner said that cargoes from the Middle East were flowing into Asia, which capped the market.

The differential for MR-size cargoes of 0.05% sulfur gasoil on an FOB South Korea basis was strong. With demand in Vietnam increasing, purchases for cargoes from South Korea were likely to be intensive. South Korea and Vietnam have struck the free trade agreement and both countries have tax benefits. Therefore, refiners in South Korea have an advantage to export to Vietnam.

Fuel oil: FOB Japan 3.5% sulfur fuel oil price go up on thin supply

The differential for MR-size cargoes of 3.5% sulfur fuel oil (380cst) on an FOB Japan basis went up. Amid declining inventories in Singapore, a sense of thin supply was prevailing in Asia. The power demand season was approaching in the Middle East, and supply to Asia from the region was expected to decline. Meanwhile, refiners in Asia were raising the operations of some units including residue fluid catalytic crackers (RFCC) to produce gasoline toward the summer demand season, which meant less productions of fuel oil.