Gasoline: Market up on some refinery troubles

The differential for MR-size cargos of 93RON gasoline on an FOB Taiwan basis and the differential for 92RON gasoline on an FOB Japan basis went up on week. The market for early January-loading cargoes was pushed up because of the backwardation structure in the Singapore futures market. In Japan and South Korea, some glitched happened at refineries. In South Korea, GS Caltex and S-Oil reportedly shut down a residue fluid catalytic cracker (RFCC) due to any issues.

In spot talks, one MR-size cargo of 92RON gasoline loading in Chiba, Japan, on Jan 7-9 was traded at a premium of $1.65/bbl to the quotations on an FOB basis.

Naphtha: High freight costs support market despite weak demand

The second-half January open-spec naphtha prices on a CFR Japan basis were unchanged. The market was at a standstill. Operations of naphtha crackers constrained in Japan, South Korea and Singapore, and demand for feedstock was perceived to be weak. However, a rise in freight rates reportedly exerted upward pressure on prices on a CFR basis. Further, buying interest in naphtha recovered on the back of strong LPG prices and this was considered as a bullish factor.

In the spot talks, 25,000mt of open-spec for delivery into South Korea in the second-half January was traded at a premium of $4.50/mt to the second-half December Japan quotations on a CFR basis.

The second-half January heavy grade naphtha prices on a CFR Japan basis were flat on week. While some South Korean players occasionally procured cargoes, supply was ample. As a result, the market was capped. Market sources mentioned that cargoes were supplied from outside Asia including the US and Europe.

Middle distillates: Japan's Idemitsu and Cosmo have buying interest for jet fuel

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis became bullish. While demand of kerosene was strong, buying interest for jet fuel arose, and the market was pushed up. In Northeast Asia, demand of kerosene for heating was getting active. Thus, refiners in Japan were planning to purchase jet fuel amid active supply of kerosene in the domestic market. According to market sources, Idemitsu Kosan and Cosmo Oil had buying interest for the fuel. SK Energy in South Korea sold an MR-size cargo loading on Jan 2-6 with a private negotiation at a premium of $0.90-1.00/bbl to the quotations on an FOB basis.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia basis became bearish on a sense of ample supply. In South Korea, oil companies finished turnaround for their refineries and there was room for supply. SK Energy recently finished turnaround for its 170,000b/d No.3 crude distillation unit (CDU) at the 840,000 b/d Ulsan refinery and was raising operation rates. With facilities operating smoothly, South Korean oil companies were moving to sell January loading cargoes one after another. SK Energy sold an MR-size cargo for Jan 4-6 loading to a Middle East-based trader on Wednesday at a discount of around 80cts/bbl to the quotations on an FOB basis.

Fuel oil: Sales continued from Dangote refinery

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. Discussions for January loading were not heard. The spot market was quiet. With crack margins shrinking, the market on a floating price basis weakened. As a result, oil companies did not have interest in spot sales that much. For January loading, there were bearish factors in the market. Freight rates were jumping and inventories remained high especially in Singapore. Moreover, sales from outside Asia continued.

The 650,000b/d Dangote refinery in Nigeria sold 130,000mt of 0.5%S straight run fuel oil for Jan 5-7 loading. The refinery started regular maintenance for its 150,000 b/d residue fluid catalytic cracker (RFCC) in early December, which would finish in end-January. However, as its crude distillation unit (CDU) would undergo maintenance from end-January to March, market sources expected that the RFCC would restart after that.

Freight

The freight rates of clean MR-size vessels strengthened. The rates between Japan and South Korea were quoted at $2.00-2.20/bbl. Due to tight availability of dirty vessels, more players were switching the use of vessels from dirty vessels to clean vessels. In addition, buying interest in kerosene and jet fuel was currently increasing, which also supported the market.