Asia Gasoline Overview

Robust reformate demand in Asia boosted gasoline prices to a three-month high on the last trading day in April, Platts data revealed. On Apr 30, Mean of Platts Singapore 97 RON closed at $48.675/bbl, MOPS 95 RON at $46.975/bbl and MOPS 92 RON at $45.575/bbl. Prices were last recorded higher at these levels on Jan 13, when they were pegged respectively at $50.35/bbl, $49.025/bbl and $48.175/bbl at Asian close.

Gasoline-naphtha spreads remained wide throughout April. 97 RON-naphtha spread was pegged at $10.675/bbl on Apr 30, 95 RON-naphtha spread at $8.975/bbl and 92 RON-naphtha spread at $7.575/bbl. The high outright gasoline prices and naphtha-related premiums were supported by a strong demand for high octane gasoline amid tight supply. Scheduled turnarounds and unplanned outages, coupled with North Asian summer driving season demand were the main factors driving the market.

FOB Singapore 92 RON unleaded gasoline traded at a new high of $49.40/bbl on May 6, the highest since 1993 when Platts began its assessments. The strength in the low octane market was a result of supplies tightening following the opening of the Asia-to-US arbitrage window in the past week, sources explained. In addition to some Korean barrels loading in May moving across to the US, another May lifting stem from China was also heard to have been fixed to head towards the US Gulf Coast.

FOB Singapore 97 RON unleaded gasoline changed hands at a three-month high on May 6 of $50.25/bbl or naphtha plus $10.786/bbl when BP sold two 50,000 bbl parcels to Vitol that lifted May 20-24. The major's aggressive selling interest capped the gains in 97 RON, resulting in the 97-92 RON spread crunching to a 29-month low of 77.5 cts/bbl. This spread was last recorded higher at 80 cts/bbl on Dec 20, 2001. However, fundamentals for high octane gasoline remained bullish, supported partly by robust domestic demand from the Persian Gulf, attracting Asian cargoes in that direction, trading sources said. The rally in the US and European markets was another factor pushing Asian prices to new highs.

A substantial drop in gasoline exports was recorded in May, as China rediverted its resources to meet voracious domestic demand. Chinese gasoline exports reached 460,000mt, down 17.86% from April and 22.03% a year ago. The month coincided with China's week-long May Day holidays, which spurred gasoline consumption among domestic travellers.

Gasoline accounted for 47.92% of China's May oil products exports. Between January-May, gasoline exports reached 2.04-mil mt, or 48.8% of China's 4.18- mil mt products exports during the period.

Singapore gasoline prices hit a record high on May 20, Platts data showed. Mean of Platts Singapore 97 RON settled at $54.40/bbl, MOPS 95 RON at $52.05/bbl and MOPS 92 RON at $50.45/bbl, marking the highest levels since Platts began assessments. The high prices was attributed to extremely buoyant demand from the Persian Gulf, partly due to the unplanned outage of one of Kuwait's 18,000 b/d reformers at its 460,000 b/d Mina Al-Ahmadi refinery, as well as increased requirements from Iran to meet growing domestic demand. Traders commented that an extremely strong demand for high octane gasoline and reformate from Japan had helped push prices up the ladder.

On the supply side, cargoes from China, Taiwan and Korea were moved out of the Asian region to the US following the opening of the east-west arbitrage window. Tight US and European gasoline markets also boosted Asian prices to new highs. The Centre for Global Energy Studies (CGES) commented that "China, like the US, has outgrown its own refining capacity and is boosting product imports to meet burgeoning oil sales," and also noted that during the first quarter of this year, net products imports rose 80% against the first quarter of 2003 to reach 600,000 b/d. "As the economy continues to expand, Chinese refiners will increasingly compete with the US for gasoline and distillate supplies, as well as crude, and competition means high prices."

FOB Singapore 92 RON gasoline prices settled at a new high of $50.725/bbl on June 01 Platts data showed. The run-up 92 RON's value was attributed to continued strong demand from the Persian Gulf and the region while supplies from China remain thin as refiners there undertake their turnarounds.

By June 8 Singapore gasoline prices had slumped 8-9.5%. FOB Singapore unleaded gasoline prices fell by around $4.30-4.75/bbl or 8-9.4% from early June on the back of a closed east-west arbitrage which kept Asian barrels in the region. The plunge in the US gasoline market between Jun 01-8 on the back of stock builds, surge in imports and hefty production levels had lowered US gasoline prices and shut the east-west arbitrage window, traders said. Chinese, Taiwanese and South Korean cargoes, that had been heading out to the US in May stayed in Asia, where typically they would have been headingh out to the US, they added.

FOB Singapore inter-RON gasoline spread widened 65 cts/bbl or 25% during June 14 trading, Platts data showed. The 97-92 RON spread settled at $3.25/bbl at Asian close, against the level of $2.60/bbl pegged on Jun 11. Shell emerged to take out Vitol's 97 RON and 92 RON offers at respective $46.50/bbl and $43.25/bbl, both loading Jun 29-Jul 3. The continued weakness displayed in the Western benchmarks cut off any opportunities for low octane barrels from Asia to be moved over. Coupled with more exports seen from China and Taiwan, the availability of low octane parcels had risen noticeably recently. On the contrary, demand for high octane gasoline, especially from the Persian Gulf, has supported and maintained the relative strength shown in the 97 RON prices.

The spread between 97 RON and 92 RON gasoline cargoes FOB Singapore widened by 37.3% or $1.25/bbl in a day to settle at $4.60/bbl on June 24, based on Platts assessments. The spread was at $3.35/bbl at close. The last high for this spread at $5.275/bbl was recorded on Sep 5, 2001. Robust demand for high octane gasoline from the Persian Gulf, coupled with Japan's active reformate buying amid its ongoing summer driving season, have contributed to the continued strength of 97 RON prices, market players said. Meanwhile, the absence of an arbitrage window to the US has forced more low octane stems to seek home in this region, traders said. The low octane arbitrage window to the US, however, could be opening up soon as a result of the recent run-up in prices there amid unplanned plant outages, they added.

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