Gasoline: Supply of non-oxy grades tightens

The differential for MR-size cargoes of 91RON gasoline on FOB South Korea basis was unchanged on week. However, supply of non-oxy grades was tightening as that from Northeast Asia was decreasing. Amid gasoline crack margins over Dubai crude oil worsening, refiners in Northeast Asia were reluctant to sell spot cargoes. In addition, in China, the fresh export quotas of oil products had yet to be announced and export volumes were falling, as earlier reported. In the meantime, PetroChina reportedly sold an MR-size cargo of 95RON gasoline loading on Oct 3-5 from Japan. The cargo was said to be loaded at Marifu and Mizushima refinery. The company sold an MR-size cargo of 92RON gasoline loading in the first half of October from Chiba.

Naphtha: Supply expected to decrease

The second half October open-spec naphtha prices on a CFR Japan basis was flat on week. Supply was expected to decrease and it seemed to support naphtha markets. Refining margins for oil products tended to decline. When the operation rates would go down at refineries, refining volumes of naphtha would decrease as well.

Delivery volumes for September from sellers were increasing. The fixed naphtha prices were going down reflecting weak crude oil prices and sellers had enough stocks for prompt cargoes.

The price gap against ethylene was widening. On the other hand, inquiries for derivatives of ethylene did not increase. Considering those situations, South Korean companies showed selling interest for ethylene. On the demand side of ethylene, buying interest was heard not to increase because the ethylene prices were forecast to decline with declining the raw material costs and weak derivatives markets.

Middle distillates: Korean SK start sales of Oct cargo at jet and gasoil

The differential for MR-size cargoes of jet fuel on an FOB Northeast Asia basis went up. In the spot market, some bullish factors surged. On the demand side, refiners in some countries like Japan were expected to increase the yield of kerosene in order to adjust heating demand in winter and refining volume of jet fuel was expected to decrease. Thus, demand for jet fuel would increase from those countries. In addition, the freight rates became weaker and it would be a bullish factor on prices on an FOB basis. In this situation, SK Energy in South Korea soled an MR-size cargo loading on Oct 1-3.

The South Korean government announced a target of 1% blending of sustainable aviation fuel (SAF) on all international flights departing from the country from 2027. In response to that, six South Korean airlines, including Korean Airlines, began or are planning to blend SAF in their international flights. Korean Air started blending 1% SAF on international flights departing from Incheon International Airport and arriving at Haneda Airport in Japan. The SAF used for the flights will be supplied by SK Energy and S-Oil, and the airline planned to use SAF for one flight per week until July next year. Korean Airlines has been in an alliance with GS Caltex since last June regarding SAF demonstration flights at Inchon International Airport.

The differential for MR-size cargoes of 0.001% sulfur gasoil on an FOB was stable on week. Full-scale sales for October cargoes by South Korean refiners started. SK Energy issued a tender to sell cargoes loading in early October. Through the tender, it would sell four 300,000bbl cargoes loading on Oct 2-4, Oct 5-7, Oct 7-9 and Oct 10-12. The company earlier sold an MR-size cargo loading on Sep 27-29 via a tender.

Fuel oil: LSFO NE Asia prices advance as less supply expected

The differential for MR-size cargoes of 0.5% sulfur fuel oil on an FOB South Korea basis went up on week reflecting views of a supply decline. Imported cargoes from non-Asia's regions were on the decreasing, causing a concern of a short supply for the time being. A few South Korean oil firms appeared to have some October loading cargoes to sell in the spot market. But they did not decide to deal the cargoes yet because they had another option to provide fuel oil to the bunker market, where fuel prices remained solid.

Meanwhile, China's government seemed to be reviewing its partial tax refund on fuel oil, said a market participant familiar with the matter. At this stage, the government carries on refunding for the total amount of imported fuel oil. The prospection, however, circulated that its refund targets might be narrowed down to the volume that would be refined into gasoline, gasoil, and so on someday soon. If that happens, independent refiners and others, which process fuel oil as feedstock, would face rising costs. Based on the situation, China's fuel oil import volumes would be waning on a long-term basis, a player pointed out. On the other hand, some independent refiners were eager to secure imported cargoes ahead of the schedule, lifting up fuel oil prices, a market source said.