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Asian Product Markets and Refinery Operations

Source: OPEC 4/2/2013, Location: Asia

The Asian market continued its recovery on the back of firm regional demand which, along with the expectations of tighter regional supplies, allowed cracks to improve.

The gasoline crack witnessed a sharp improvement over the month. The main supporting factor for this development was the prospect of tightening supplies over the coming period in line with the onset of the maintenance season in Asia. On the demand side, the higher requirements over the Lunar New Year holidays in China have boosted the crack.

Refinery turnarounds and expectations of tighter supplies boosted gasoline, with additional support from stronger regional demand, mainly from Vietnam and Indonesia. These factors allowed gasoline to show a sharp recovery. The crack spread against Dubai crude in Singapore gained more than $5 to average $18/b in February. Light distillate naphtha also showed a significant improvement on the back of healthy regional demand, mainly from Taiwan, South Korea and Malaysia. This allowed the crack to increase and move to the positive (increasing from minus $2/b to plus 70¢/b). Additional support came from the supply side, with the expectations of limited exports from India and the Middle East contributing.

At the middle of the barrel, the gasoil crack continued improving during February as sentiment has been lifted by growing requirements from healthy regional demand. This occurred amid expectations of tightening supplies due to upcoming refinery turnarounds in the region.

Chinese demand could also be a supportive factor over the coming period, given recent signs of stabilization in the manufacturing and industrial sectors.

In addition, Singapore’s onshore middle distillate stocks remained below the five-year average amid expectations of declining imports over the coming weeks.

The gasoil crack-spread in Singapore against Dubai gained almost $3 to average $23/b in February.

A fall in imports from the US and Venezuela pushed Singapore’s inventories of residual fuels lower, supporting the market. However, less demand due to lower utilization rates at Chinese independent refiners and the rise in crude prices caused the fuel oil crack spread in Singapore against Dubai to lose 60¢ to average minus $11/b in February.

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