Gasoline: MR-size market strengthens toward demand season in northern hemisphere

　The differentials for MR-size non-oxy gasoline cargoes loading in Northeast Asia strengthened. It was viewed that gasoline demand would be stimulated toward the summer driving season in the northern hemisphere. In the spot market, Formosa Petrochemical Corp (FPCC) in Taiwan issued a sell tender for three 250,000bbl cargoes of 92RON gasoline loading on Jul 18-22, Jul 23-27, and Jul 27-31 that would close on last Tuesday.

　In discussions for oxy grades, buying interest from Indonesia state-owned Pertamina was supporting the market. The company conducted a buy tender for a total of 1.6 mil bbl of 90RON gasoline and a total of 900,000bbl of 92RON for delivery in mid- to late June.

　Meanwhile, the differential for SR-size cargoes of 90RON gasoline on an FOB South Korea basis weakened. Buying interest from major buyers, Japanese trading houses and refiners, lacked momentum. According to Japanese trading houses, some refineries in Japan were reportedly starting to adjust operational rates due to a slackening in gasoline supply.

Naphtha: Market extends falls with slack fundamentals

The differentials for the second half July for open-spec naphtha on a CFR basis softened. Supply/demand fundamentals for July arrival cargoes were slack, and the market's upside was capped. Although the summer gasoline demand season was approaching, it had not yet pushed up naphtha prices, and some market sources also pointed out that price fluctuations for naphtha relative to gasoline prices would likely remain small going forward. The increasing refining of US-origin light crude oil in Japan and South Korea was also cited as a factor curbing spot naphtha procurements.

　In the spot market on Jun 9, South Korean Hanwha TotalEnergies (HTC) moved to procure 2H July arrival cargoes. Meanwhile, a sense of caution that August arrival prices would strengthen compared to July arrivals was circulating among buyers. As independent refineries in China were reportedly permitted to reduce operating rates, there were expectations that domestic naphtha volumes would decrease and imports would increase towards the prompt months. According to traders, information indicated that state-owned refineries in China were operating at around 70% of capacity, while independent refineries were operating at about 55%.

　Regarding plant-related matters, Pengerang Refining and Petrochemical (PRefChem) in Malaysia was planning to restart its naphtha cracker (1.3mil mt/year ethylene production capacity) by mid-month. No changes to the startup schedule have been heard so far.

Middle: The market weakened with ample sales cargo from South Korea

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis weakened. Very strong selling pressure from South Korea was weighing on the spot market daily. As crack margins for jet fuel in the Singapore paper market were high, hovering around $45.00-46.00/bbl, oil companies were actively pushing refinery throughput and sales.

In South Korea, SK Energy reportedly sold at least a total of two MR-size cargoes loading on Jul 4-8 and 20-24 through private negotiations. Additionally, another company was reportedly moving to sell one MR-size cargo for late July loading, though details remained unclear. Chinese traders were pointed out as potential buyers. One MR-size cargo for prompt Jun 28-30 loading, which S-Oil sold via a tender, was reportedly traded at a discount of $1.00/bbl to Singapore's June quotations on an FOB basis.

　The differentials for MR-size 0.001% sulfur gasoil cargoes loading in Northeast Asia weakened.

The market was weighed on by strong selling interest. While sales from South Korea were robust, inquiries from a major buyer, Australia, were thin. The Australian government would end its measure to halve fuel taxes on gasoline and gasoil, which had been implemented since April, at the end of June. A rise in domestic prices and a consequent fall in demand was expected from July onwards. Furthermore, the limited demand for gasoil, such as for agricultural machinery, due to Australia currently being in winter, was also a factor contributing to weak buying interest.

There were signs that a certain volume of cargoes were directed from India to Asia. In Singapore, the influx of cargoes from outside the region has begun, as middle distillate inventories were low, and the market remained firm compared to other regions. Meanwhile, state-owned oil companies in India were successively raising supply prices, which was expected to lead to stagnant demand.

Fuel oil: Market softens due to weak buying interest

　The differentials for MR-size 0.5% sulfur fuel oil cargoes loading in Northeast Asia weakened. Buying interest remained weak, reflecting backwardation in the futures market and high freight rates. Amid continued backwardation in the futures market, bunker demand remained sluggish, and heightened storage risk was a concern, leading traders to hesitate in procuring fuel oil cargoes. Formosa Petrochemical Corp (FPCC) sold 40,000mt of 1.5%S fuel oil (MCB) loading on July 1-3 via a tender.