Gasoline: Supply recovery and retreating buying interest push down prices

The differential for MR-size cargoes of 93RON on an FOB Taiwan basis and that for MR-size cargoes of 92RON on an FOB Japan basis went down. Supply recovery and retreating buying interest pushed down the market for cargoes loading in late December.

Formosa Petrochemical Corp (FPCC) in Taiwan sold 250,000bbl of 92RON gasoline loading on Dec 27-31 at a premium of 60cts/bbl to the quotations on an FOB basis.

The market for late December was under downward pressure because the Dec/Jan contract was $1.40/bbl in favor of December in the Singapore futures market. In addition, a sense of sluggish supply/demand fundamental weighed on the market. On the supply side, supply capacity would recover because turnaround or troubles were expected to be over by December in the region. On the demand side, several buyers were inactive to buy cargoes for late December loading toward the end of the fascial year.

Naphtha: Market bearish with lower run rates and LPG use

The differential for the first-half January on a CFR Japan basis was unchanged. It was reported that the operation rates of naphtha crackers were expected to decline in Singapore in December. According to a market source, PCS would cut the operation rates of naphtha crackers by around 10% from current high 80's% next month and ExxonMobil seemed to be planning to reduce the operation rates to around 60% at the Singapore plant as well. In the country, Aster Chemicals and Energy was shutting down operations of its naphtha cracker. The reduction of running rates was also seen in Northeast Asia. Because of this, demand was retreating.

Lotte Chemical in South Korea bought 25,000mt of open-spec for delivery into Yeosu and Daesan in the first-half January at a premium of $5.50/mt and $6.50/mt to the first-half December quotations on a CFR basis via a tender. For the first-half January delivery on a CFR Japan basis, the possible deal level would be at a premium of around $7.50/mt to be assessed 30 days before and at a premium of around $4.00/mt to be assessed 45 days before.

Middle distillates: Supply expected to increase in Asia, causing a fall in gasoil prices

The differentials for MR-size cargoes of jet fuel became bearish in Northeast Asia on week. The market was pushed down as the paper swaps market formed backwardation as well as expected increasing supply. In addition, the arbitrage window from Asia to the US West Coast was shrinking, and inquiries for the high flash point cargoes were settling down. In South Korea, turnaround of refineries was scheduled to be over by late December, and selling interest of South Korean refiners was expected to increase.

The differentials for 0.001% sulfur gasoil went down. The market declined as supply in Asia was expected to increase. As reported, exports from China were increasing. In addition, some cargoes from the Middle East and India were likely to be headed to Australia or Asia on the back of the weak European market.

Sinochem sold an MR-size cargo loading on Dec 16-18 through a tender at a discount of around 60cts/bbl to the quotations on an FOB basis. The cargo was to be loaded from the refinery of West Pacific Petroleum Co Dalian (WEPEC). Additional sales of December loading cargoes were expected to surface from China.

In Japan, ENEOS sold an MR-size cargo loading in mid-December. Idemitsu Kosan had exported at least two MR-size cargoes loading in December, but details including their destinations were not known. Oil firms in Japan were actively exporting gasoil as export prices were higher than the domestic prices.

Fuel oil: Some bearish factors push down market

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis weakened. Some bearish factors pushed down the market.

The FOB Northeast Asia market was pushed down by surging freight rates. Freight rates for MR-size tankers from South Korea to Singapore rose by $7.00-8.00/mt from the previous week.

In China, petroleum companies had to digest their export quotas for this year, and were inactive to buy imported cargoes.