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Asian Product Markets & Refinery Operations - June 2015

Source: OPEC 6/16/2015, Location: Asia

The Asian market strengthened during May as strong regional gasoline and middle distillate demand kept crack spreads on the rise.

The Singapore gasoline crack recovered its upward trend during May on the back of strong regional demand with increasing consumption being reported from India, Indonesia and Pakistan. This offset increasing exports from China and Japan, thus keeping the gasoline market supported. On the other hand, expectations of higher gasoline demand from the Middle East for the coming weeks have also been fuelling bullish market sentiment. The gasoline crack spread against Dubai crude in Singapore gained $3 versus the previous month to average $18/b in May.

The Singapore naphtha crack continued its downwards trend. Fundamentals remained weak as buying interest from the petrochemical sector slowed, with increased switching to LPG as a feedstock. Another bearish factor has been heavy maintenance in naphtha crackers across the region amid expectations of higher Western inflows in the coming weeks.

For the middle of the barrel, gasoil cracks partially recovered ground lost the previous month on the back of stronger regional demand and workable arbitrage to Europe. Demand for middle distillates continued showing impressive gains in Asia which, along with ongoing regional turnarounds, eased the supply overhang. On the other hand, news that ADNOC will run its Ruwais refinery at a lower rate fuelled tightening sentiment and lent temporary support to the gasoil market. The gasoil market was further supported by expectations of growing requirements from Saudi Arabia, from seasonally higher demand over the upcoming summer period, and from Australia, as refineries there are in maintenance.

The gasoil crack spread in Singapore against Dubai gained around $1 versus the previous month’s level to average around $16/b in May.

The fuel oil market continued to weaken during May due to pressure coming from low demand in the region. However, expectations of decreasing western inflows lent some support to the market and allowed the fuel oil crack spread in Singapore against Dubai to average around minus $3.5/b in May. This represented a recovery of more than $1 versus the previous month.

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