| RSS
Business center
Office
Post trade leads
Post
Rank promotion
Ranking
 
You are at: Home » News » internal »

Factbox: Asia Q1 oil products outlook and factors to watch

Increase font size  Decrease font size Date:2017-01-12   Views:620
The Asian oil products market is heading into the first quarter of 2017 with gasoline, gasoil and jet fuel/kerosene poised for some weakness after witnessing strength in the previous quarter.

While LPG and fuel oil are likely to find some support, the naphtha market is keeping a close eye on the volume of cargoes that might flow out of India and whether there is any possibility of the reopening of the western arbitrage window.

The following are some of the factors that market participants said might influence various oil products in Asia in the January-March quarter.



GASOLINE

The Asian gasoline market in Q1 is likely to give up some gains after a robust Q4, as the market rebalances itself.

The benchmark FOB Singapore 92 RON gasoline crack against front-month Brent futures averaged $9.11/b in Q4 -- a relatively high level -- supported by a robust US gasoline market as well as refinery turnarounds in Asia. But these conditions are unlikely to sustain in Q1.

Demand in the US is expected to ease, which will likely drag down global gasoline cracks.

Most refineries in Asia have not scheduled any turnarounds until late March, which means regional supply is expected to be plentiful.

The Asian gasoline market had seen ample surplus cargoes from the West arriving from Q2 onwards last year.

The strong Asian market could trigger a repeat of such trade flows. Several LR1 cargoes have been booked for the East. The market will also keep a close eye on whether China will be able to sustain its recently acquired status as North Asia's largest gasoline exporter.

Among other factors, there are also expectations that Indonesia, Asia's biggest gasoline importer, may see a rebound in imports this year -- but not necessarily in Q1 -- on continuous strong demand and an absence of new refining capacity.


NAPHTHA

The Asian naphtha market in Q1 will keep a close eye on whether Indian state-owned producers such as Bharat Petroleum Corp. Ltd., and privately run Reliance Industries Ltd. would raise exports, and if state-run Indian Oil Corp. would continue to export light naphtha from its 300,000 b/d Paradip refinery.

The market will also be keeping a close watch on whether the western arbitrage window, which was last open in November and led to plentiful inflows for December and January, would reopen.

As of now, even though end-year demand had largely mopped up the surplus tonnage, the arbitrage window remains shut because of rising clean freight rates.

RIL, which in November shipped six naphtha cargoes, is expected to boost exports, as its petrochemical plants start using ethane.

RIL expects to have six VLECs on the water in the next two quarters.

Traders are are closely watching Q1 and Q2 refinery maintenance schedules in India for a clearer indication of export volumes.

Asia's Q1 steam cracker maintenance program is relatively light, with naphtha-fed steam crackers in Thailand and Malaysia scheduled for turnarounds in February.

With the Northeast Asian ethylene-naphtha crack still hovering strongly above $650/mt, traders expect steam crackers to run at full tilt and stoke naphtha feedstock demand. LPG

The Asian LPG market is expected to remain supported in Q1 because of strong North Asian demand and tight Middle Eastern supply.

While some sources expect cuts in OPEC and non-OPEC crude production from January to affect LPG supply from the Middle East, others said the impact is likely to be minimal as producers would mainly cut output of heavy crude oil, which normally has a low LPG yield.

Higher-than-expected January contract prices announced by Saudi Aramco could prompt Asian importers to look for barrels from the US. Aramco's January propane CP at $435/mt hit a 13-month high.

Butane CP at $495/mt registered a 25-month high.

Strong LPG prices have led to a narrowing of its price spread to naphtha, making it less economical to consume LPG for petrochemical production at steam crackers.

This was evident in Taiwan, where state-owned CPC Corp. and privately owned Formosa Petrochemical Corp. skipped spot LPG purchases for January delivery and preferred to crack more naphtha instead.

In addition, market participants are closely watching if Q1 imports by China remain buoyant.

Strong downstream propylene prices are expected to lift demand for LPG at propane dehydrogenation plants.

China has raised operating rates at PDH plants, encouraged by attractive margins.


GASOIL

The Asian gasoil market may take a breather in the early part of Q1, as market participants believe that most buyers had covered a large portion of their requirements during a robust Q4, which witnessed a rush for cargoes for year-end holiday needs.

Sources expect weakness to seep into the market as holiday driving needs typically cease after the Christmas and New Year holidays.

On the supply front, Middle Eastern and North Asian barrels are expected to move within the region as arbitrage opportunities appear to remain shut.

In the last two weeks of Q4, prompt-month January Exchange of Futures for Swaps, or the EFS, hovered at around minus $11/mt levels.

This still placed 10 ppm sulfur ICE gasoil futures a tad above the Asian 500 ppm sulfur gasoil price.

Coupled with high freight rates for clean tankers, sources foresee more hurdles for cargo movements across regions.

Meanwhile, January regrade paper spread -- a measure of jet fuel strength over gasoil price -- narrowed from a three-week high of $1.50/b on December 27 to 55 cents/b on January 4.

This would likely lead Asian refiners to leave their gasoil yield unchanged.


JET FUEL/KEROSENE

The outlook for Asia's jet fuel/kerosene market looks slightly bearish as market participants said demand for heating oil from North Asia would start to taper off.

Japanese importers had aggressively turned to the physical spot market in Q4, sending FOB Korea spot cargo differentials soaring to a nine-month high of minus 5 cents/b on December 13.

But according to Japan Meteorological Agency's latest forecast, Kanto, Tokai, Hokuriku, Hokkaido, and Tohoku face a 40% probability of having above-normal temperatures over January-March.

As Japan is the single-largest user of kerosene for heating, the weather outlook is expected to reduce demand for cargoes.

Buying interest has dried up for January delivery cargoes. Kerosene stocks in Japan rose for the first time in almost three months in the week ended December 24.

But the market may find some support from increased demand for jet fuel from China where Q1 is traditionally peak season for jet fuel consumption because of increased air travel during the Lunar New Year holidays.


FUEL OIL

The Singapore high sulfur fuel oil market is expected to remain supported and continue to trade at a premium going into Q1 on expectations of steady demand from the bunker fuel market and potential incremental demand from within the region, especially China.

Even as western arbitrage fuel oil arrivals into Singapore for January is expected to be relatively high compared with December, traders expect the market to remain more or less balanced on expectations of incremental demand from China leading up to the Lunar New Year in end-January.

Market sources estimate western arbitrage fuel oil volumes in the vicinity of 5.5 million mt to arrive East for January, while a little over 3 million mt is said to have so far been fixed for February.

On the end-user bunker fuel side, Singapore ex-wharf 380 CST bunker fuel term contracts for Q1 2017 have mostly been concluded at premiums of around $4/mt to Mean of Platts Singapore 380 CST HSFO assessments.

This compares with the Q4 term contracts concluded at premiums of $2.50/mt to $3/mt to MOPS 380 CST HSFO assessments.
 
 
[ Search ]  [ ]  [ Email ]  [ Print ]  [ Close ]  [ Top ]

 
Total:0comment(s) [View All]  Related comment

 
Recomment
Popular
 
 
Home | About | Service | copyright | agreement | contact | about | SiteMap | Links | GuestBook | Ads service | 京ICP 68975478-1
Tel:+86-10-68645975           Fax:+86-10-68645973
E-mail:yaoshang68@163.com     QQ:1483838028