Gasoline: Market of oxy gasoline plummets with slack fundamentals

The differentials for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis went down. Whereas demand remained sluggish, a sense of ample supply emerged in the market. In Northeast Asia, including South Korea, oil companies that had secured crude oil supplies were gradually increasing refinery run rates.

Meanwhile, in South Korea, spot trading, which had been suspended due to the Middle East crisis, resumed, and a sense of oversupply was also emerging. In China, the government eased export restrictions that had been in place since Mar 12, and signs of increased exports in May were strengthening. However, due to sluggish demand in Southeast Asia, inventories in Singapore were already building up, as previously reported.

In the Singapore paper market, the May/June inter-month spread remained in backwardation of $5.00/bbl. Traders, aware of the risk associated with the inter-month spread, were hesitant to procure late May-loading cargoes.

Naphtha: Mitsubishi Chemical buys mid-July delivery cargo

Talks on cargoes for delivery in the second half June started. Both bullish and bearish factors were mixed in the market, and the market lacked clear direction. There were expectations for increased naphtha production due to rising refinery run rates in Northeast Asia and increased light crude processing.

However, some naphtha crackers in Japan were seen not to have recovered supply from refineries, and imported cargoes would likely be required for those crackers. In addition, South Korean firms were reportedly advancing naphtha procurements, relying on government subsidies. Furthermore, high freight rates from the US to Asia could support prices on a CFR basis.

Against this backdrop, traders were focusing on the gasoline market. Typically, naphtha demand also increased towards the summer gasoline demand season. Currently, gasoline demand, particularly in Southeast Asia, remained sluggish, but it would be necessary to closely monitor future gasoline demand and market fluctuations.

In the spot market, Mitsubishi Chemical in Japan bought open-spec naphtha for delivery in mid-July at a premium of around $20/mt to the first half May Japan quotations on a CFR basis via a tender.

Middle distillates: Deal for late May loading jet fuel concluded at flat on FOB Korea basis

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia basis dropped. Aviation demand was extremely limited, while ample supply from South Korea and China led to slackening supply/demand fundamentals. Export volumes from South Korea for May were expected to reach 900,000mt, a level seen prior to the Middle East crisis. From a profitability perspective, oil firms remained active in refining and selling jet fuel even after June. SK Energy sold one MR-size cargo loading on May 23-25 in the spot market. The deal price was flat to the quotations on an FOB basis.

The differentials for MR-size 0.05% sulfur gasoil loading in Northeast Asia softened. Buying interest for Southeast Asia was weak. Chinese oil companies were soon expected to resume exports to ASEAN, which led to slackening supply/demand fundamentals. In Vietnam, Petrolimex closed buy tenders on May 30 for each MR-size cargo loading on May 5-15 and 16-20. "This might not be buying based on real demand, but rather a market check," commented a trader. Vietnam has been receiving crude oil and oil products from other countries. Meanwhile, domestic demand was limited, and a surplus was reportedly emerging in the domestic market.

Fuel oil: 0.5% sulfur market down due to weak demand for bunker and backwardation

The differential for MR-size 0.5% sulfur fuel oil on an FOB South Korea basis declined. Weak bunker demand was compounded by elevated risks due to contango in futures prices. In the Singapore futures market, the May/June month-on-month spread remained in contango of more than $25.00/mt. This led to perceived elevated risks for late May loadings. Furthermore, depressed bunker demand has continued due to disrupted logistics amidst heightened tensions in the Middle East. Consequently, traders have been reluctant to procure fuel oil cargoes.