Asian Product Market in December 14

Source: OPEC 1/8/2015, Location: Asia

The Asian market strengthened during November with middle distillate crack spreads exhibiting a sharp gain on the back of strong winter demand offsetting increasing supplies, which along with the positive performance seen at the top and bottom of the barrel, allowed refinery margins to show a sharp gain in Asia. The Singapore gasoline crack maintained the recovery seen last month on the back of support coming from the demand side with higher requirements from Indonesia, India and China.

Meanwhile, the supply side continued exerting pressure with increasing export volumes seen from Japan and South Korea, and from other refineries back on line from peak autumn maintenance. However, during the last several weeks this was offset by the tight sentiment fuelled by disruptions at Taiwan’s Formosa refinery. The gasoline crack spread against Dubai crude in Singapore gained 20˘ to average $11.6/b in November.

The Singapore naphtha crack continued weak as market sentiment remained bearish due to a supply overhang in the region. However, the naphtha cracks recovered some ground on the back of stronger buying interest coming from Northeast Asian countries. Looking ahead, the market is concerned about the potential impact on demand from subsidy cuts in Indonesia and Malaysia in December.

At the middle of the barrel, cracks exhibited a sharp recovery during November on the back of strong seasonal demand within the region. Despite several refineries being back from maintenance, the supply side was impacted by maintenance at a secondary unit at Taiwan’s Formosa refinery, which has taken 450 tb/d of diesel off the export market during November. This, along with firm demand, has allowed the middle distillates crack spread to recover.

The middle distillates market was supported by higher seasonal demand for middle distillates from several countries in the region, mainly from Indonesia, India and the Philippines. The upside was also boosted by strong demand seen in most Northeast Asian countries. The gasoil crack spread in Singapore against Dubai showed a gain of more than $4 versus the previous month’s level to average around $19/b in November. The fuel oil market recovered the ground lost in the previous month on the back of strong bunker demand from South Korea. This supported the market along with tightening sentiment fuelled by falling inventories in Singapore amid supply concerns arising from news about financial troubles at one on the major bunker suppliers in the region. The fuel oil crack spread in Singapore against Dubai gained more than $3 to average minus $6/b in November.




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