-Gasoline and jet fuel demand to rise while naphtha, gasoil fuel oil market to soften in Asia-

In 2024, gasoline demand is expected to grow. One year has passed since restrictions on economic activities were lifted after the covid-19 pandemic, which lasted for three years. Demand from Southeast Asia hit the bottom and shifted to rebounding phase, according to many market players.

Meanwhile, more refineries plan to start up and supply is expected to grow. In West Africa and Mexico outside Northeast Asia and in Shandong in China, new refineries are preparing for the start-up in 2025. In this situation, with exports from major exporter China unstable, some traders need to secure new supply sources.

The naphtha market would likely be soft. Market players find it unlikely for demand to improve significantly. This is because new facilities would start operations in China, major consumer of petrochemical products. China aims to produce petrochemicals from naphtha produced at domestic refineries. Since supply of petrochemical products are forecast to surpass demand, Japanese, Korean and Taiwanese players are predicted to continue production adjustment. Operation rates cannot be raised and this would curb naphtha demand.

In Japan and Korea, market players are averse to potential surplus inventories arising from a decline in operation rates of crackers. These players seem to have curtailed term contractual volumes. Market sources mentioned that it was difficult to find bullish factors on the demand side, adding that movements of suppliers would draw attention.

The jet fuel market is anticipated to be firm, reflecting a recovery of worldwide air transportation demand. In the Singapore paper swap market, "regrade", which shows difference between gasoil and jet oil prices, has reversed since late November 2023. This is for the first time since 2019 before the Covid-19 pandemic. This indicates demand for jet fuel is strong.

On the other hand, the gasoil market is forecast to be soft. In November 2023, Russia was said to completely lift bans to export gasoil. Under such circumstances, demand is sluggish due to economic slowdown and forecasts of mild winter in Europe. Demand for gasoil from Asia does not increase amid economic slowdown too. The paper market was in sharp backwardation thus far, mirroring supply concerns for prompt timing, but the spread is shrinking. Not a few market players consider the change in the spread to be a change in the market and market trend.

The fuel oil market is expected to largely depend on the situation of the 615,000 bbls per day Al Zour refinery in Kuwait. The refinery started up three crude distillation units (CDU) by mid-2023, which, however, were operating unstably until end-December. Export of major product low sulfur fuel oil was limited. A South Korean player said, "The operations would become stable in 2024 and exports to Asia would sharply increase."

Nevertheless, some market players are still worried about the stable operations. Some South Korean oil companies tend to raise refining volumes of low sulfur fuel oil whose crack margin is relatively firm. These players intend to continue exports to the Asian market. Some market players predict that supply of low sulfur fuel would be ample in Asia.