Gasoline: Supply of Feb cargoes become ample

The differentials for MR-size cargos of 92RON gasoline on an FOB Northeast Asia were unchanged on week. Supply was getting ample and market lacked the upward momentum. Toward the winter off-demand season in the region, demand in South Korea was sluggish and refiners in the country were increasing their exports. Following in January, exports from the country could reach 30-35 MR-size cargoes in February. In Japan, operations of refineries were smooth, and oil companies had enough export room. Idemitsu Kosan and ENEOS both had one or two MR-size cargoes loading in the month. Meanwhile, it was informed that gasoline cargoes from the US were flowing into Asia. Demand in the US was also reported to remain weak and the weekly inventories statistic showed the sharp drops two weeks in a raw.

Naphtha: Operation rates of crackers probably decline in Korea due to narrow margins

Open-spec naphtha prices on a CFR Japan basis were at a premium of $22.00-23.00/mt to Japan quotations to be assessed 30 days before delivery and at a premium of $14.50-15.50/mt to Japan quotations to be assessed 45 days before delivery. It was probable that the operation rates of naphtha crackers in South Korea would decline. In addition, a sense of extremely tight supply was getting eased.

According to a source, it was possible that the operation rates of naphtha crackers in South Korea would decline due to narrow refining margins of petrochemical products. As of Jan 10, the price spread between naphtha and ethylene was at $200-220/mt in favor of ethylene and that between naphtha and propylene was $170-180/mt in favor of propylene. The market prices of olefines didn't show a sign to rise because demand for derivatives didn't recover. At present, the operation rates of naphtha crackers in the country were around 75%, it was reported.

On the supply side, supply for cargoes, which would be delivered from the Mediterranean Sea to Asia in the second half February or March, seemed to recover, so that excessive supply concerns on prompt cargoes was reportedly settling down.

Middle distillates: SK sells early Feb MR-size cargo at +1.75

The differentials for MR-size cargoes of jet fuel on an FOB Northeast Asia increased. Market was firm as demand of air travels was expected to increase toward the Luna New Year holidays in February across Asia. Meanwhile, sales for cargoes loading in February were gaining momentum in South Korea. SK Energy sold an MR-size cargo loading on Feb 3-5 through a tender at premium of $1.75/bbl to the quotations on an FOB basis. The cargo was likely to be headed to Australia. Another player who held a cargo from South Korea mentioned that cargoes from the country loading in early February could be traded at a premium of $1.60-1.70/bbl to the quotations.

The differentials for MR-size cargoes of 0.001% sulfur gasoil on an FOB Northeast Asia went up sharply early this week. However, the markets in a part of countries in the region fell down. The weekly market situations were volatile. Exports volume from China in January was prospected to be 0.8-1.0 ml mt. Initially, the volume was expected to be 0.8 mil mt, but the bearish view pushed down the market prices in a part of countries.

Fuel oil: KDHC procures 0.3%S FO

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis was unchanged on week. Korea District Heating Co (KDHC) bought 27,000mt of 0.3% sulfur fuel oil for deliver in late January at a premium of higher than $56.00/mt to Singapore quotations (0.5%S). Hyundai Corporation was awarded and the company would bring a cargo from Malaysia. KDHC was now switching its fuel oil-powered power generators to LNG-powered one. The company would reduce procurements of fuel oil going forward and would buy fuel oil from the domestic market.

The price for VLSFO in Tokyo Bay was at $656.50/mt as of Jan 10, significantly down by $27.00/mt from Dec 20. The declining Singapore 0.5% sulfur fuel oil paper swap values pushed down the market price. Talks on cargoes for delivery in January had started. A lot of sales had been initially heard, but selling pressure was retreating as a sense of tight supply strengthened. ENEOS announced a cut of its monthly sales quotas from Negishi and Mizushima refineries to trading houses. In addition, barges and shipment berths were so congested. Thus, many sellers were inactive to sell cargoes in the spot market.