Asia weekly products: Stocks pressure light end cracks, 3.5% cracks rise

London, (Quantum Commodity Intelligence) – Stock builds either side of the Pacific helped to keep Asian gasoline and naphtha margins in check over the past week, according to Quantum data, as distillates were mixed and fuel oil rose.

Higher refinery runs in the US, led to yet another stock build in gasoline there, despite demand picking up.

With US runs now above 92%, refinery owners are not deterred by relatively low cracks as they seek cash flow. This left US cracks pressured, the RBOB-EBOB differential narrow and helped to keep a lid on Asian margins.

RON 92 in Singapore fell around $0.50/b on the week to $5.95/b FOB Singapore as a result, as lower crude dovetailed with a big stock build in light ends in Singapore (18%) and Fujairah (43%) to offset a rise in demand in both India and Japan.

With the crude market backwardation and near-term weakness the prompt-July crack contango moved from -$0.48 to -$0.87/b.

Conversely, Q4 cracks were up $0.20/b on the week reflecting a steeper backwardation in the crude markets.

The picture was similar for naphtha, where cracks also came under pressure from lower crude, but also rising supplies from the US.

Cracker demand for liquid feedstock remains high in the region and the CIF Japan crack fell from -$0.54/b to -$1.85/b as imports weigh.

Distillates

It was a similar picture for jet kero where cracks eased as stocks in Singapore grew, reflecting a market where crude price rises were not being met by product demand.

Air passenger numbers are rising, however, in every region for the first time, according to industry analysts OAG, but that is being led by south Asia as India recovers from its second wave of COVID-19 with daily infections just 15% of where they were at the peak.

Southeast Asia and North East Asia passenger numbers were marginally higher.

Distillate stocks in Singapore, presumably jet, were up a sizeable 15%, which left cracks down $0.60/b FOB to $2.71/b on the week FOB Singapore, around $0.20/b below the daily average so far this month.

Q4 cracks rose marginally on the week.

Diesel was slightly more bullish, although refining margins were down. A dearth of exports last month from China, where sales fell 38%, no doubt helped tighten the market, and cracks were down only marginally ($0.20/b) to $5.62/b.

That's just shy of the average so far this month of $5.86/b.

Q4 cracks rose $0.13/b.

Fuel oil

Fuel oil, however, was the biggest winner, with lower stocks and higher prices in China meant that higher sulfur was firmer and marine fuel lower.

Marine fuel 0.5% cracks were down $0.20/b on the week to Brent +$2.19/b, despite total stocks in Singapore rising 10% on the week, but down from the $2.77/b average so far this month.

Q4 cracks flatlined, reflecting lower crude prices further out.

Higher sulfur cracks, conversely, were 5% higher at -$9.58/b. They are up 5% on the week, and largely in line with the average so far this month.

The pattern was replicated down the curve with Q4 cracks around $0.40/b higher on the week.