The Asian market continued to be relatively healthy during December on the back of firm regional demand. However, pressure coming from the supply side with the end of the maintenance season caused refinery margins to fall.
The Asian gasoline market continued to receive support from the demand side, with strong regional demand, mainly from India and Indonesia, and higher requirements seen from East Africa.
On the other hand, some tightening sentiment was fueled by stricter quality standards in the gasoline market starting in 2017 with the introduction of lower sulphur specifications in Vietnam and the “China V” quality standards starting in January.
However, despite healthy demand, gasoline margins lost some of the ground gained in the previous month due to expectations of higher inflows from the West and increasing refinery runs following the end of maintenance in the region.
The gasoline crack spread against Oman crude in Singapore averaged around $11.5/b in December, losing around 50 cents compared with the previous month’s level.
The Singapore naphtha crack weakened during December, losing more than $3/b as the supply side outweighed strong demand in the petrochemical sector. Additional volumes are expected from the West amid increasingly available volumes coming from the Middle East, mainly from the UAE.
At the middle of the barrel, the gasoil crack spread reversed the recovery trend seen in the previous month due to pressure coming from seasonally increasing supplies following the end of refinery maintenance. The ample supplies outweighed the higher demand reported from several countries such as Bangladesh, Pakistan, Indonesia and Malaysia.
Another bearish factor was the expected impact of the anti-pollution response on Chinese diesel and gasoil demand. Several factories were forced to reduce operations and some restrictions were placed on vehicle movements, mainly in the more affected cities of Beijing and around the Shandong province.
The gasoil crack spread in Singapore against Oman averaged around $11.4/b in December, losing around $1 compared with the previous month’s level.
The Asian fuel oil market continued to gain support from firmer demand for bunker fuel and power generation. Additional demand was also reported from Malaysia, while slower demand growth is expected from South Korea after the restart of its nuclear capacity.
The fuel oil crack spread in Singapore against Oman averaged about minus $2.5/b in December, losing around 50 cents from the previous month. Developments in crude oil prices also impacted fuel oil margins.