Gasoline: Sinopec increases Jul-loading by 200,000mt

The differentials for MR-size cargos of 92RON gasoline on an FOB Northeast Asia basis were unchanged on week. Some bearish factors were witnessed in the market as discussions were shifting to August loading cargoes.

The arbitrage window from Asia to the US West Coast remained closed, and no purchases of cargoes to regions outside Asia including Mexico were seen. In addition, high freight rates put downward pressures on prices on an FOB basis. Meanwhile, market players in China were increasing exports. Sinopec was said to have made decisions to increase its exports in July to around 200,000mt. Thus, total exports in the month from the country would add up to around 850,000mt. It was possible that PetroChina still had some cargoes for sale loading in July from some places such as Dalian.

Naphtha: OSN markets down as demand for China expected to decrease

The second half August open-spec naphtha prices on a CFR Japan basis softened on week. There was growing possibility that demand for China would decrease. According to sources, the US government announced that exporters handling ethane would not have to obtain licenses to export ethane to China that had been previously requested. Due to the announcement, Chinese end-users could import US ethane again without restrictions and demand for naphtha might retreat instead.

The second half August heavy grade naphtha prices on a CFR Japan basis declined due to ample supply from the US. According to a market source, traders who had US cargoes were unable to sell them to Venezuela and those surplus cargoes were bounded to Asia.

Middle distillates: Gasoil yield at refineries expected to increase

The differentials for MR-size cargoes of jet fuel and 0.001% sulfur gasoline were unchanged on week. However, profitability to produce gasoil was improving on the back of widening negative gap of regrade in the Singapore paper swaps market, and refiners tended to subdue productions of jet fuel and increase yield of gasoil. Thus, supply of jet fuel was expected to decline and that of gasoline was prospected to increase in the spot market. In this situation, Formosa Petrochemical Corp (FPCC) in Taiwan issued a 300,000bbl cargo of jet fuel loading on Aug 10-14 and 750,000bbl of 0.001% sulfur gasoil loading on Aug 16-20.

In July, demand in Europe was also expected. Demand for diesel cargoes was increasing as the summer holiday season was kicking in. Meanwhile, supply disruptions were likely to arise as the extreme heat-wave hit the area, causing operation disorders of refineries.

Fuel oil: Healthy margins stimulate selling interest

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. Several oil firms showed selling interest in the spot market. In Singapore futures markets, the crack spread of 0.5% sulfur fuel oil against Dubai crude oil remained above $9.00/bbl. In this situation, a few refineries in Northeast Asia were targeting sales. Formosa Petrochemical Corp (FPCC) in Taiwan conducted a sell tender for 0.5% sulfur straits run fuel oil loading on Aug 11-30. FPCC sold the oil product for three consecutive since June loading.