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Asian Product Market - September 2017

Source: OPEC 9/13/2017, Location: Middle East

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The Asian market continued its upward trend in August, and was also affected by disruption of supply from the USGC, resulting in growth in all product crack spreads, with the exception of fuel oil, which declined sharply.

The Singapore naphtha crack inched up compared with July levels to gain around $1.92/b over the month, moving the crack spread into positive territory for the first time since February 2017. The crack spread against Oman crude in Singapore averaged $0.21/b in August. Product fundamentals were solid in August, with strong gasoline prices supporting reforming spreads and healthy petrochemical demand in the region. Additionally, scheduled refinery maintenance will affect 0.3 mb/d from MRPL, Indiaís Mangalore refinery, which is a key naphtha exporting refinery in the region. Formosa Petrochemicalís planned shutdown of its 2 million tons yearly (mty) is projected to last until the end of September, pressuring the crack spread going forward.

The Asian gasoline 95 RON crack spread against Oman crude in Singapore averaged $17.1/b in August, up by a healthy $3.0/b compared with the previous monthís level. The gasoline market continued to strengthen during August, supported by healthy overall demand in the region and exacerbated by refinery outages on the USGC, which opened up arbitrage opportunities to the US. Additionally, fire at Petrochinaís 0.4 mb/d Dalian refinery further tightened supply in the region, thus supporting the crack spread.

At the middle of the barrel, the gasoil 50ppm crack spread witnessed some gains, adding around $0.1/b compared with July to reach $13.9/b in August. In the first half of August, the product exhibited a downward trend on the back of a heavy monsoon season in India, halting diesel requirements and unworkable arbitrage to Europe. However, towards the end of the month, the gasoil crack spread received support from supply outages on the US Gulf Coast as product prices increased. The jet/kero crack spread also experienced upward momentum in tandem with gasoil, increasing by $0.6/b compared with July to reach $12.74/b in August, supported by high global demand and outages from the US Gulf Coast.

At the bottom of the barrel, the Asian fuel oil 180 cst crack spread in Singapore against Oman averaged about minus $3.2/b in August, shedding around $1.7/b of its previous monthís value. The fuel oil market weakened as stocks in Singapore rose on the back of rising volumes from the US prior to Hurricane Harvey and power sector demand from South Korea and Japan waned.

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