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Asian Product Market - June 2017

Source: OPEC 6/14/2017, Location: Middle East

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The Asian market weakened in May, pressured by the supply side amid expectations of increasing refinery runs following the end of peak maintenance season. A lack of export opportunities also weighed on market sentiment.

The Asian gasoline market lost part of the recovery it had witnessed during the previous month as a bearish environment in Europe filtered into Asia amid a regional increase in supplies, exerting pressure. Several secondary units were back from maintenance amid an expected increase in refinery runs following peak maintenance season. This outweighed firm regional demand, though temporary support came from Japanese holidays and some export opportunities to the Middle East.

In addition, increasing exports from China to Singapore continued exerting some pressure on the market.

The gasoline crack spread against Oman crude in Singapore averaged around $11/b in May, losing about $1/b compared with April.

The naphtha market weakened in Asia, and Singapore’s naphtha margins lost more than $1/b in May, due to slowing demand in the North Asian region amid lower LPG prices, which impacted naphtha as a petrochemical feedstock. Another bearish factor was the expected increase in Western inflows.

In the middle of the barrel, the gasoil crack spread lost the recovery shown the previous month, pressured by the supply side with the approaching end of heavy maintenance amid expectations of lower arbitrage opportunities East to West, with refineries on the rise worldwide.

The gasoil crack spread in Singapore against Oman averaged around $11.20/b in May, a loss of almost $1/b compared with the previous month’s level. The ULSD got support from emerging Indian demand with the country’s transition to low-sulphur specifications, which contributed to widening differentials versus highsulphur diesel within the region.

The Asian fuel oil market has continued to receive support from a tightened environment amid stronger regional demand, not only for bunkering but also for power generation, mainly from Bangladesh, Pakistan and Sri Lanka.

Another supporting factor has been increasing volumes heading to the Middle East due to higher requirements for power generation in that region.

The fuel oil crack spread in Singapore against Oman averaged about minus $3.4/b in May, gaining more than $1/b against the previous month’s levels. Further gains were limited by expectations of increasing inflows in the coming weeks.

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