Gasoline: Bullish and bearish factors mixed in market

　 Differentials for MR-size gasoline cargoes loading in Northeast Asia were unchanged. Both bullish and bearish factors were mixed in the market. As a bullish factor, decreased gasoline production due to unit trouble was pointed out. According to a market source, the alkylation unit at the Geelong refinery in Australia reportedly remained shut down. It was reported that a fire occurred at the unit in mid-April this year and it had yet to be restored. There was also information that several refineries, including one in Port Arthur, the US, had shut down operations. It was considered that the Asian market could be pulled up by the high gasoline market in the US. Meanwhile, the US announced that it had temporarily eased sanctions on Iran, removing Iranian crude oil and petroleum product transactions from the scope of sanctions. Traders in Singapore viewed this as a bearish factor. As discussions between the US and Iran continued, there was a perception that crude oil and product supply from the Middle East could return.

　 In South Korea, GS Caltex in South Korea had sold an MR-size cargo loading on Jul 27-31 in a tender. It would be co-loaded with 91RON, 95RON, and 98RON. The market for high-octane grades remained firm. Market sources indicated that supply/demand for blending components used to produce high-octane grades was tightening.

Naphtha: Gulei Petrochemical in China buys cargo

　 Differentials for 1H Aug CFR Japan open-spec naphtha discount was shrinking. The markets slightly improved as buying interest was witnessed from China. According to market sources, Gulei Petrochemical in China procured naphtha in the spot market. The company reportedly planned to restart operations at its naphtha cracker from late July to early August. Market sources also said that in Northeast Asia, besides Gulei Petrochemical, other manufacturers were seen purchasing cheap naphtha to increase their naphtha cracker run rates.

　 However, bearish factors remained dominant, and prices stayed in the negative territory. Supply from the Middle East began to return, leading to a surplus of prompt loadings.

　 Meanwhile, movements to procure LPG, mainly by South Korean and Chinese players, and use it as petrochemical feedstock were reportedly strengthening. According to a market source, South Korean importer E1 purchased 23,000mt of butane for delivery in the second half July and the first half August at Yeosu via a tender. The cargo was reportedly scheduled to be supplied to YNCC. In China, profitability of propane dehydrogenation (PDH) units was favorable, and their run rates were reportedly increasing.

Middle Distillates: Market softens on more supply from Japan/Korea, while China to ease export restrictions

　 Differentials for MR-size jet fuel cargoes loading in Northeast Asia went down. Increased supply pushed down the market. As the crack spread for middle distillates remained high in the Singapore futures market, oil companies showed a proactive stance toward exports. In China, information was reportedly heard that the government would lift restrictions on export destinations from July onwards. Until now, the government had only allowed state-owned oil companies to export petroleum products to Hong Kong, Macau, and countries in Southeast Asia with deep cooperative ties. Additionally, export volumes were expected to be increased to 800,000mt from July onwards. If Chinese players sell large volumes in the spot market, it was highly likely to be a bearish factor for the market. On the other hand, state-owned oil companies had reduced crude oil procurement and set refinery operational rates at an average of 70-71%. Therefore, even if export restrictions were lifted, the view was also received that there would be limits to the exportable volume, a trader said.

　 Differentials for MR-size 0.001% sulfur gasoil cargoes loading in Northeast Asia also softened. Meanwhile, in South Korea, sales had fallen significantly below the previous year's levels due to surging retail prices, and moves to promote exports seemed to have emerged due to inventory buildup.

Fuel Oil: Expectations increase for demand for power in summer

　 Differentials for MR-size VLSFO (0.5% sulfur fuel oil) cargoes loading in South Korea were unchanged. However, demand season for power had come in Northeast Asia and expectations increased for demand for power. While LNG prices were relatively high, those for petroleum oil products extended losses recently. Consequently, market sources expected that power companies might shift to fuel oil-fired power plants. As previously reported, Japan and South Korea were likely to further increase refining of sweet crude oil from the US and refineries in the countries were expected to increase production of low sulfur fuel oil.

　 CPC Corp in Taiwan closed a tender to buy 36,000mt of 0.3%S fuel oil arriving in August on last Tuesday. The price validity date was set on Thursday. The cargo was for Taiwan Power Company.