Gasoline: Non-oxy markets go down with sharp Jun/Jul backwardation

The differentials for MR-size cargoes of non-oxy gasoline loading in Northeast Asia softened. The differentials for cargoes loading in the second half of June were pushed down as the paper swaps market in Singapore formed backwardation. The June/July intermonth spread in the Singapore futures market was currently in backwardation of around $6.30/bbl, which was perceived deep, and market sources pointed out that buying interest for second-half June cargoes among traders tended to fall.

Formosa Petrochemical Corp (FPCC) conducted a sell tender closed on Tuesday for two 250,000bbl 92RON gasoline cargoes for loading on Jun 14-18 and Jun 18-22. These volumes were to be co-loaded and were awarded at a premium in the range of $3.10-3.20/bbl to the quotations on an FOB basis.

Naphtha: Premiums shrink with capped demand in line with narrow margins

The first half July open-spec naphtha prices on a CFR Japan basis went down naphtha demand had been sluggish due to poor olefin profitability. The premiums for the first half July delivery shrank by around $10/mt from May 18 to May 22. The crack spread of the raw material against July Brent crude oil was at $ /mt as of May 22, sharply narrower $115 /mt on week.

Profitability for naphtha crackers was poor, with a narrow price spread between ethylene/propylene and naphtha. According to traders, operational rates for naphtha crackers, excluding South Korean firms, were mostly at minimum levels. In South Korea, the government budget for petrochemical business subsidies reportedly was approaching its limit. It remained unclear whether the subsidy program would be expanded. However, market sources pointed out that if the subsidies were to end, South Korean firms might reduce naphtha cracker operational rates due to poor profitability.

Middle distillates: Markets for Jet fuel and 0.001%S GO down on deep backwardation

The differential for MR-size cargoes of jet fuel on an FOB South Korea basis weakened. In the Singapore futures market, steep backwardation was formed from June to July, making premiums prone to narrow. Strong selling pressure from oil firms was also a bearish factor. S-Oil Co in South Korea sold a total of two MR-size cargoes loading on Jun 21-25 and Jun 26-30 via a tender closed on Thursday. According to several market sources, negotiations for the former were ongoing at a premium in the range of $2.00/bbl to the quotations, while the latter was heard to be in the discount range to the quotations. It was heard that a significant differential in awarded prices had emerged due to varying buying interest depending on loading dates.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB South Korea basis was at a premium in the range of 45-55cts/bbl to Singapore quotations (0.001%S), and the differential for MR-size cargoes on an FOB Japan basis was at a premium in the range of 25-35cts/bbl to the quotations, both narrowing by 55cts/bbl from a day before. The Singapore futures market was forming a steep backwardation for coming months. Premiums were prone to narrow in the second half of the month, eyeing future backwardation.

GS Caltex in South Korea sold one MR-size cargo of 0.001% sulfur gasoil loading on Jun 26-30 via a tender closed on Wednesday at a premium of 40-50cts/bbl to the quotations on an FOB basis. The buyer was a major trader. In the same tender, GS Caltex also sold one MR-size cargo of 0.05% sulfur gasoil loading on Jun 4-8 at a discount of around $2.00/bbl to the quotations on an FOB basis. SK Energy was heard attempting to sell 0.001% sulfur gasoil for late June loading.

Fuel oil: Tight supply persists in talks on 0.5%S cargoes on FOB Korea

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. But perceptions of tight supply did not disappear in Asia including Singapore, and the market was solid. Oil companies in Japan and South Korea increased refining light crude oil from the US. The refiners in South Korea decreased production of heavy distillates and decided to import fuel oil cargoes for bunker.

On May 13, S-Oil in South Korea sold 22,000mt of slurry fuel oil (0.7%S) loading on Jun 1-3 via a tender. Trafigura reportedly bought it at a discount of $40.00/mt to the quotations on an FOB basis.

Inflows of cargoes decreased from outside regions to Singapore. The 650,000b/d Dangote refinery in Nigeria kept operation stable and sales of fuel oil loading in June were not heard so far. The 615,000b/d Al-Zour refinery of Kuwait Petroleum Corp (KPC) seemed not to sell cargoes due to conflicts in the Middle East.