Gasoline: China Oct exports forecast to 500kt

　 The differentials for MR-size gasoline cargoes on an FOB Northeast Asia basis went down. Reportedly, Chinese companies resumed exports of cargoes loading in October, which was expected to ease an excessive sense of tight gasoline supply. According to a market source, it was also heard that exports from China in October could be 500,000mt. Prior to the temporary suspension of exports from China, the volumes were expected to be around 400,000mt.

GS Caltex in South Korea sold two MR-size cargoes on Thursday loading on Nov 14-18 and Nov 29-Dec 3 via a tender. Both cargoes were awarded as co-loaded with 91RON and 98RON. They were likely to be destined for Australia. Refer to the Deals section for details.

On last Friday, China National Offshore Oil Co began offering 12,000mt of 92RON gasoline loading on Oct 20-22 from Hainan. Some oil companies in Taiwan and Japan were also confirmed to have sales availability for November-loading cargoes.

Naphtha: Malaysian firm buys cargo while cracker glitches reported in Japan

　 The differentials for the second-half (H2) Nov open-spec naphtha (OSN) delivery to Japan were unchanged. Both bullish and bearish factors were mixed, and the market stayed in a wait-and-see stance. Supply from Europe for second-half November delivery to Asia was likely to be at low levels. Meanwhile, continued supply from the Middle East was alleviating the impact of reduced European supplies. According to a market source, roughly 800,000mt per half-month is recently exported from Qatar to Asia. Additionally, KPC is regularly conducting sales on a DES Chiba basis.

　 On the demand side, naphtha cargoes were reportedly purchased for PRefChem in Malaysia. While PRefChem continued operating its naphtha cracker, a glitch at the crude distillation unit (CDU) in its refinery was reported, and its in-house naphtha production was perceived to be insufficient. If the CDU glitch cannot be resolved, it was pointed out that it might have to be shut down for repair, which could lead to continued feedstock shortages.

　 Meanwhile, a naphtha cracker in the Chiba area in Japan was reportedly shut down from early October due for a glitch. It was heard that the shutdown period would be around two to three weeks. The impact on naphtha supply and demand remained unclear.

Middle distillates: Jet market retreats, backed by Chinese supply

　 The differential for MR-size jet fuel cargoes loading in Northeast Asia initially firmed but then retreated. As Chinese companies resumed exports loading in October, a sense of slack supply/demand fundamentals was perceived in the Asian region. It was pointed out that China's October export volumes, including those for Hong Kong and Macao, could reach 2.0-2.1mil mt.

　 In South Korea, GS Caltex on last Thursday sold an MR-size cargo loading on Nov 6-10 via a tender. It was also pointed out that as the cargo was co-loaded onto an LR2-size vessel and was a high flashpoint product, it was awarded at a higher price than typical MR-size cargoes.

　 In the US, Hurricane Isaias passed through the US Gulf Coast and was expected to make landfall in Alabama and Florida while gaining strength. As a result, workers were evacuated from several refineries, and oil products supply was on a declining trend. Supply/demand fundamentals in the US Southeast were tight.

　 The differentials for MR-size 0.001% sulfur gasoil on an FOB Northeast Asia basis were unchanged from last week. In South Korea, no new deals had been observed. No new sales by GS Caltex for November materialized. A view from market sources was also indicated that the company's export volume was lower than usual for this time of year. Last November, the South Korean government had reduced the deduction amount for oil taxes from 15% to 10%. Anticipating a price surge from November, provisional domestic demand increased in October, inventories decreased, and a trend emerged to reduce exports for November loading. The South Korean government currently sets a cap on gasoil export volumes at 100% of the previous year's level for the same period for four oil companies. Consequently, each company's export volume would decrease this year.

　 In Europe, as momentum for strategic reserve releases was increasing, France decided to release 10 mil barrels of gasoil. The Group of Seven (G7) earlier announced that they would release a total of 100 mil barrels of crude oil and gasoil through the International Energy Agency (IEA). Russia was planning to continue its export ban until the end of October, but intended to partially resume exports if domestic supply was met. In both cases, uncertainty remained strong, and the market lacked a clear direction.

Fuel oil: Sense of tight supply prevails

　 The differentials for MR-size 3.5% sulfur fuel oil on an FOB South Korea basis unchanged. However, supply/demand fundamentals tightened, and market sentiment remained firm. A sense of tight supply for HSFO bunker was strengthening not only in Singapore, a major trading market for bunker fuel, but also in Northeast Asia, including China. This was due to declining supply of fuel oil from the Middle East and Russia, coupled with reduced HSFO production as refineries in Northeast Asia cut crude processing of Middle Eastern crude oil. Amid this, no sales of high sulfur fuel oil cargoes by Northeast Asian oil companies had been observed for a long time, and spot trading remained sluggish. Meanwhile, shipping companies grew wary of high VLSFO bunker prices, shifting to bunkering HSFO, which led to increasing demand for high sulfur fuel oil.

　 On last Thursday, the Chinese government notified four oil companies of a total of 1.07 mil mt of low sulfur fuel oil export quotas as the third batch this year. This was 370,000 mt more than the third batch last year, bringing the total quota for this year to 14.07 mil mt. This exceeded last year's total of 13.90 mil mt by 170,000 mt.