Gasoline: Talks on Aug gasoline loading quiet, players watch China export

　 The differentials for MR-size gasoline loading in Northeast Asia remained unchanged. According to market sources, more players in the market were expecting increased supply, anticipating the possibility that China's export quotas would be lifted or eased for August-loading cargoes. Meanwhile, on the demand side, inquiries from Indonesia remained firm. State-owned Pertamina had reportedly attempted to start up the residue fluid catalytic cracker (RFCC) at its 360,000b/d Balikpapan refinery several times, but had not achieved full operations. It was expected to attempt the startup work again in mid-July.

　 No new sales of non-oxy grade were heard. Regarding Taiwan oil companies, Formosa Petrochemical Corp (FPCC) was expected to have cargoes available for spot sales. The movements of CPC Co remained unclear.

　 One Japanese refiner was reportedly experiencing a delay in its import schedule for July arrival that was an MR-size from a trader to be loaded in South Korea. No short-covering activities had been heard so far against this backdrop.

Naphtha: Market gains; arb shrinks, China procurements merge

　 The differentials for open-spec naphtha (OSN) on a CFR Japan basis for H2 August delivery rose into a premium range. The arbitrage window between Europe/US and Asia shrank, leading to a decrease in cargoes from outside the region. Traders pointed out that a heatwave in Europe had led to a decrease in refinery operational rates, affecting naphtha production.

　 On the demand side, buying interest from China was reportedly emerging. It was perceived that supply/demand fundamentals would tighten if buying interest from China were to strengthen in the future. According to a market source, with the spread of expectations that China's export restrictions on petroleum products would be eased, there was a view that domestic supply of naphtha for petrochemical use in China would decrease due to increased gasoline production.

　 In the spot market, Mitsubishi Chemical purchased 25,000mt of OSN for H2 August delivery at a premium of around $5.00/mt on a CFR basis to H1 July Japan quotations in the middle of the week. Towards the end of the week, premiums strengthened further on the back of expectations of tightening supply/demand fundamentals.

Middle distillates: Korea calculated to export over 30 MR-size cargoes in Jul

　 The differentials for MR-size cargoes of jet fuel loading in Northeast Asia softened in the latter half of the week. Sales of late July-loading cargoes from Japan and South Korea continued, easing supply/demand fundamentals. According to a market source, information indicated that over 30 MR-size cargoes for July loading were sold from South Korea. Gasoil exports were restricted, and refiners were reportedly increasing jet fuel exports. The firm jet fuel crack margins also seemed to be boosting exports.

　 The differentials for MR-size 0.001% sulfur gasoil loading in Northeast Asia remained soft. Active exports from Japanese players emerged in the latter half of the week, capping the market. ENEOS sold one MR-size cargo of 0.001% sulfur gasoil for mid-July loading from Negishi and Kawasaki ports. Sales by Idemitsu Kosan and Cosmo Oil for July loading were also heard from Japan. According to a market source, oil companies were concerned about the possibility of gasoil inventories exceeding capacity of storage tanks. They suggested to the government that if they continued to refrain from exports, they might have to reduce refinery operational rates. The government reportedly permitted oil companies to export surplus products, from the perspective that if operational rate reductions were prolonged, it would affect the buildup of winter kerosene inventories.

Fuel oil: Prompt cargo surfaces in spot market from Korea

　 The differentials for MR-size 0.5% sulfur fuel oil loading in South Korea softened. Production volumes in Northeast Asia, including South Korea, increased, resulting in spot export availability. Tensions in the Middle East eased, and crude oil supply recovered. In South Korea, refinery turnaround was scheduled to largely conclude by H1 July, leading to increasing operational rates. Consequently, production of VLSFO was increasing. SK Energy was reportedly planning to begin selling an MR-size cargo of VLSFO for H1 July loading.