Gasoline: Selling interest for late-July loading cargoes from Japan emerges

The differentials for MR-size gasoline cargoes loading in Northeast Asia remained unchanged. As the summer driving season approaches in the Northern Hemisphere, the likelihood of tightening supply/demand fundamentals is gradually increasing. Amid this, late-July loading 92RON non-oxy gasoline cargoes on an FOB Japan basis were heard offered for sale. Whether a deal was concluded remained unclear.

South Korean GS Caltex resumed operations of one residue fluid catalytic cracker (RFCC) unit (90,000b/d) at its Yeosu refinery (800,000b/d) by the end of May. Meanwhile, a vacuum gasoil fluid catalytic cracker (VGOFCC) entered turnaround until around Jun. Traders said that, considering the restart of one RFCC unit and the turnaround of the VGOFCC, gasoline production would likely recover by around 40,000b/d. GS Caltex would likely export cargoes for the time being to resolve delayed May and June loading term contracts due to RFCC glitches.

Naphtha: Weak demand caps the market in line with soft ethylene market

The differentials for the second half July for open-spec naphtha on a CFR basis softened. Weak demand weighed on the market. On Jun 2, in the spot market, Japan's Asahi Kasei Mitsubishi Chemical Ethylene Corp (AMEC), Mitsui Chemicals, and South Korean LG Chem purchased open-spec naphtha. Among them, Mitsui Chemicals purchased 25,000mt of H2 July CFR Chiba naphtha at around a premium of $15/mt to the quotations on a CFR basis to be assessed 45 days before cargo delivery.

As naphtha cracker run rates remained low, naphtha demand also remained weak. According to market sources, due to factors such as narrow naphtha-ethylene spreads, many naphtha crackers in Japan, South Korea, Taiwan, and Southeast Asia were undergoing planned production cuts or shutdowns.

On the supply side, an increase in the refining of US-origin light crude oil in Japan and South Korea was pointed out to be boosting naphtha yields.

Middle GS Caltex sells two cargoes of jet fuel

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went up on strong buying interest. Refiners in Northeast Asia were currently proceeding with supplies for term lifters, resulting in limited spot sales for 1H July loading. Amidst this, buying interest gathered for a cargo loading in 1H July by GS Caltex. The company sold two MR-size cargoes for July loading through private negotiations this week. The price for loading on Jul 5-9 was at a premium of $3.50/bbl to the quotations on an FOB basis, and that for loading on Jul 9-13 was at a premium of $3.00/bbl to the same quotations.

In China, the second batch of export quotas for the year was announced. The volume for petroleum products was 13.0mt. However, as China was only exporting to a limited number of countries, it was also reported that it was unlikely that Chinese products would suddenly flood the spot market following the announcement of the quotas.

The differentials for MR-size 0.05% sulfur gasoil cargoes loading in Northeast Asia climbed, reflecting a decrease in supply. Recently, oil companies had been curtailing high sulfur gasoil supply amidst firm 0.001% sulfur gasoil market conditions. South Korean GS Caltex sold one MR-size 0.05% sulfur gasoil cargo loading on July 10-16 through private negotiations. The price was on an FOB basis at a discount of $1.90/bbl to Singapore quotations. During May-June, procurements by key buyers of 0.05% sulfur gasoil, such as Vietnam, were limited. Consequently, SK Energy and other companies reduced their high sulfur gasoil supply.

Fuel oil: Chinese gov permits independent refineries to cut run rates

The differentials for MR-size 3.5% sulfur fuel oil (380cst) cargoes loading in Northeast Asia remained unchanged from the previous day. Demand remained sluggish. Due to high crude oil prices keeping fuel oil paper prices elevated, buying from end-users has been decreasing. Furthermore, as backwardation was observed in the futures market, traders and others were wary of inventory buildup and curtailed cargo procurements.

In the regional bunker market, centered around Singapore as a key supply hub, demand appeared to remain sluggish. In China, independent refineries were refraining from purchasing fuel oil cargoes due to deteriorating refining margins.

Since June, the Chinese government has permitted independent refineries to reduce their run rates. However, it requires that production does not fall below 80% relative to their monthly average output in 2025. Previously, to secure domestic supply of petroleum products, the government had requested independent refineries to maintain run rates above their 2024-2025 average in early April.