Gasoline: SR-size market jumps amid thin selling cargoes

　The differential for SR-size cargoes of 90RON gasoline on an FOB South Korea basis went up. According to market sources, troubles at the residue fluid catalytic cracker (RFCC) at GS Caltex's 800,000b/d Yeosu refinery continued, leading to limited sales availability in the spot market. S-Oil appeared to have firmed up its supply plans under term contracts. Amidst this, one South Korean company reportedly sold an SR-size cargo of 90RON gasoline loading in the second-half of Jun to one Japanese oil company by Monday at a premium of around $5.50/bbl on an FOB basis to the quotations.

　In Vietnam, nationwide sales of E10 gasoline, blended with 10% ethanol, were scheduled to commence on Jun 1. Accordingly, MTBE consumption as an oxygenate was expected to decrease. For imported cargoes, the MTBE content was reportedly lowered from the conventional 10% to 6%, starting with May-delivery cargoes. Usage of existing petroleum-derived gasoline was also expected to decline.

Naphtha: Market capped by low operations, more Russian cargoes, and expects for better ME situation

　The first half July open-spec naphtha prices on a CFR Japan basis weakened. Weak ethylene market continued to weigh on naphtha demand. In South Korea, some petrochemical companies reportedly reduced operational rates of naphtha crackers. On the supply side, information was heard that increased volumes of Russian cargoes were arriving in Asia. Lacking buying interest from China also contributed to capping the market. It was pointed out that the necessity for naphtha was relatively low compared to other countries, as they were able to produce olefins from ethane, propane, methanol, etc. Under such circumstances, Chinese market sources pointed out that an expectation for an improvement in the situation surrounding the Strait of Hormuz might also be a factor pushing down naphtha prices.

　Regarding plant operations, Taiwanese Formosa Petrochemical Corp (FPCC) was currently halting operations of its No.1 naphtha cracker and No.3 naphtha cracker. According to Taiwanese market sources, the No.3 cracker (with an ethylene capacity of 1.2 mil mt/year) was undergoing repair work and was scheduled to finish in late August, with its restart expected to be in September at the earliest or later.

Middle distillates: 10ppm GO prices fall as Australian buying activity calms down

　The differential for MR-size cargoes of jet fuel on an FOB South Korea basis weakened. GS Caltex in South Korea sold one MR-size cargo loading on Jun 24-28 via a tender. Market sources believed the buyer would take the cargo to Australia. The company had already sold at least three MR-size cargoes for June loading in the spot market. Its 800,000b/d Yeosu refinery had high run rates of over 80%, and its supply availability seemed ample.

　The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB South Korea basis went down on strong selling pressures. Purchases by Australian players for June cargoes were largely winding down, and inquiries were limited. In South Korea, S-Oil Co sold one MR-size cargo of 0.001% sulfur gasoil loading on Jun 26-30 via a tender at a discount range to the quotations on an FOB basis. In Japan, at least one oil firm was considering exporting 0.001% sulfur gasoil for June loading. Procurement of alternative crude oil by Japanese refiners was proceeding smoothly. Two refiners planned to increase their refinery utilization rates to 80-90% from June onward. This was aimed at increasing gasoline supply as the demand season was approaching. Consequently, gasoil supply would also increase, and there was a view that a sense of surplus would strengthen in Japan going forward.

Fuel oil: Koreas sees oversupply of bunker amid aggressive sales

　The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged. However, sales of low sulfur fuel oil cargoes were not seen in the spot market. But surplus bunker supply appeared in South Korea. Several oil companies including S-Oil and Hyundai Oilbank Co imported low sulfur fuel oil arriving in June. In addition, trouble of the residue fluid catalytic cracker (RFCC) occurred at the 800,000b/d Yeosu refinery of GS Caltex. The refiner also conducted turnaround of secondary units and increased supply of bunker oil. Those companies were aggressively selling bunker oil and prices declined. Furthermore, refiners in South Korea increased refining of sweet crude and production of low sulfur fuel oil.

　On the other hand, production of low sulfur fuel oil tended to decrease due to low operation rates of Chinese state-owned refineries. Consequently, market sources pointed out that they moved to further import cargoes going forward.