Products: May 31-Jun 4:South Korea 0.5%S fuel oil weakens on oversupply
The differential for MR-size cargoes of 92RON gasoline on an FOB Northeast Asia basis was unchanged. Talks on spot cargoes were quiet without any offers for cargoes loading in July. Refiners in Northeast Asia were focusing on term supply, and were unlikely to be making moves to sell spot cargoes. However, it was speculated that exports from China could decline in July. In China, in addition to increasing demand at home, sales margins stayed firm. Therefore, refiners were reluctant to export gasoline. Exports were expected to go down sharply in July following in June. Meanwhile, Formosa Petrochemicals Co (FPCC) in Taiwan was talking on term cargoes of 93RON gasoline (0.005%S) loading from July to December. Through the tender, the company would sell 250.000bbl per month. The company seemed to be planning to conclude it by Jun 10.
In the Northeast Asia spot markets, South Korean end-users were actively buying for second-half July delivery. LG Chem seemed to have purchased paraffinic naphtha at a premium of $14/mt to Japan quotations. Also, GS Caltex seemed to have bought heavy full range naphtha at a premium of $11/mt to the same quotations. Further, YNCC was issuing a tender to buy heavy full range grade. A South Korean market source noted that inflows of the US cargoes which were relatively high prices on the impact of rising freights pushed up the Asian market values.
The differential for MR-size cargoes of jet fuel on an FOB South Korea basis went down on poor buying interests amid weak demand in Northeast Asia. Others pointed out that the price could be fair as the arbitrage window for cargoes to flow into the US West Coast was unstable.
The differential for LR-size cargoes of jet fuel on an FOB Middle East basis was unchanged. However, market sentiment was weak on sluggish demand. In Europe, one of the main outlets for cargoes from the Middle East and India, the COVID-19 outbreak was settling down, but a market source pointed out that demand of jet fuel was not increasing as expected as demand of long-distance flights had yet to be recovered. Therefore, movements to procure cargoes from the Middle East and India lacked the momentum.
The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis weakened from ample supply. South Korean oil companies were raising up yields for gasoline and middle distillates whose refining margins are fine, and were declining productions of fuel oil whose profitability lowered instead. One South Korean oil company informed that premiums of VLSFO for bunker were gradually up, and productions of 0.5% sulfur fuel oil as the feedstock at South Korean refineries would decrease in end May through June.