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Asian Product Markets and Refinery Operations - February 2012

Source: OPEC 3/10/2012, Location: Asia

Asian cracking margins displayed a mixed performance, with the top of the barrel continuing to recover on the back of strong regional demand in a tight market, while the bottom of the barrel weakened, due to over-supply in the region. Despite a rise in crude prices, the gasoline crack continued the upward trend started last month, when sentiment was fuelled by stronger regional demand — mainly from Indonesia, Vietnam and Pakistan — amid tightening supplies on the back of refinery turnarounds in the region. The naphtha crack also continued to recover, as fundamentals remained supportive on the back of improved demand from the North-East Asian petrochemical sector and the limited arbitrage movement from Europe, where naphtha became the preferred petrochemical feedstock, due to higher propane prices.

Additional support came from the supply side, notably the lower export levels from India and the Middle East, maintaining the tight environment in the region. The gasoline crack spread against Dubai crude in Singapore rose by $1.3 to average around $12.5/b in February. The middle distillate market remained relatively well balanced, as the supply side supported the market. Refinery maintenance continued to keep gasoil supplies tight, while regional demand remained healthy, especially from Sri Lanka and Indonesia. In addition, kerosene demand was healthy, due to colder weather in North-East Asia, which also contributed to the fall in Japanese kerosene stocks. The gasoil crack spread in Singapore against Dubai decreased by $1.6 to average around $19/b in February. This fall was attributed mainly to higher crude prices. The Singapore fuel oil crack lost the ground gained last month, as sentiment soared amid heavy western inflows and massive selling activity in the physical and swap markets. On top of this, support from China´s bunker market was likely to have waned, while buying from independent refiners slowed after the Lunar New Year holiday. The fuel oil crack spread in Singapore against Dubai fell by $4.6 to average around minus $0.1/b in February.

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