Gasoline: Differential on FOB Japan basis rebounds on tight fundamental

In talks on gasoline, the differential for MR-size cargoes of 92RON gasoline on an FOB Japan basis rebounded. Supply/demand fundamental for November-loading remained tight. Turnaround continued at refineries in South Korea, Taiwan and Japan. Meantime, Chinese oil firms would possibly focus on exporting jet fuel. In Southeast Asia, one of the main demand regions of gasoline in Asia, there were several troubles of refineries in Indonesia and Malaysia, so that supply/demand was pointed out to be currently tight.

Considering the situation, a part of Northeast Asian oil companies was focusing on bringing cargoes into blending tanks in Singapore and having private negotiations instead of selling them on an FOB basis.

In the spot talks, one MR-size cargo of 92RON non-oxy gasoline loading in late November was traded at a premium in the low $1's/bbl to the quotations on an FOB Japan basis. This cargo was heard to be scheduled to be loaded at the end of this month. The awarded price rebounded from the previous deal for the second half November-loading that was done at a premium of around $1/bbl although the backwardation structure was formed in the futures market.

Naphtha: Supply from Russia expected to decrease further

The first half December open-spec naphtha prices on a CFR Japan basis were unchanged. It was considered to be a bullish factor that supply from Russia was expected to get squeezed further. According to a market source, it was because the US imposed another sanction on some energy companies in Russia including Rosneft. On the other hand, the operational rates of naphtha crackers did not rise due to weaker ethylene market sentiment. An ethylene cargo for delivery into China in November was heard to be traded at around $750/mt in the spot market.

Demand for heavy grade naphtha was getting to decrease. Several companies would probably reduce the operational rates of a reformer because profitability of the facility was getting poor. One end-user did not move on buying heavy grade naphtha because it was currently considering the operational rates of reformers. Another end-user had no will to buy the material within this year.

As for facilities, in Thailand, PTTGC shut down one ethylene unit "OLE4" with the production capacity of 500,000mt-per-year in mid-October in line with its refinery and aromatics facilities' maintenance activities during October and November. The shuts were scheduled to last until January next year.

Middle distillates: Jet fuel demand for the US increases

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis were pulled up by strong inquiries for the US Western Coast. The arbitrage trade remained stable. Additionally, the winter heating oil demand season started in Japan, and inquiries for jet fuel were emerging as an alternative of kerosene. That supported the market.

Chevron kept the low operation rates at its 290,000b/d El Segundo refinery. Market sources indicated that the refinery's 45,000b/d hydrocracker was currently operating at 35%. Repair works of this unit were scheduled to begin in November, but they were expected to last until fall in 2026. Thus, the unit was likely to remain at low operating rates until then. Strong buying interest for Asian cargoes was expected to persist.

In South Korea, one oil company appeared to have sold multiple cargoes loading in November through private negotiations by this week. According to market sources, mid to late November loading cargoes were done at a premium of $0.80-1.00/bbl to the quotations on an FOB basis.

The differential for SR-size cargoes of kerosene on an FOB South Korea basis gained on week. Temperatures were going down in Japan and demand of kerosene the country was increasing, boosting inquiries for SR-size cargoes in South Korea. Traders considering purchasing South Korean cargoes in November reported that the tradable price could be at around $2.00-2.50/bbl to the quotations on an FOB basis. Market participants handling the South Korean refinery products and tank cargoes indicated that kerosene supply was limited in part due to increasing inquiries for jet fuel destined for the US. Consequently, they appeared to be considering further price increases. Additionally, negotiations on term cargoes starting in December had begun between some Japanese trading houses and South Korean suppliers, but no information emerged that any deals took place.

Fuel oil: differential and refining margins remain soft

The differential for MR-size cargoes of 0.5%S fuel oil on an FOB South Korea basis was unchanged. The market was at a standstill without any fresh bids and offers.

With the market staying poor with high levels of the inventory in Singapore, refiners in Northeast Asia were inactive to sell spot cargoes. On the back of turnaround of refineries, some South Korean refiners had some cargoes for sale loading in November, but no sales were confirmed to date. In the Singapore paper swaps market, crack margins of 0.5% sulfur fuel oil over Dubai crude oil shrank to slightly over $3.00/bbl. Meanwhile, floating prices remained soft for a long time. For this reason, traders were reluctant to sell cargoes. The arbitrage window from Europe to Asia was closed, although cargoes from other regions were flowing into Asia.