Asian gasoline margins rebound

Gasoline refining margins rebounded in Asia this week on rising demand in China, new spot buying from Indonesia and a fall in Singapore inventories.

The refining margin — or the Argus 92R gasoline fob Singapore price against Ice Brent crude — rose to almost a $2/bl premium today, a three-week high. Margins have now risen for four consecutive trading sessions after falling briefly into negative territory for the previous two sessions.

The prompt gasoline price has risen against forward months, with the balance August and September spread at parity today. The market had been in contango — with prompt prices at a discount to forward values — since 17 July.

The Asian market had come under pressure from expectations of a rise in gasoline exports from major supplier China. High stocks and flooding have hit domestic Chinese prices, prompting state-controlled refiners to look to more lucrative overseas markets.

China's gasoline exports fell to a more than one-year low of 675,000t (184,000 b/d) in May, according to Chinese customs data. But overseas shipments rose to 214,000 b/d in June, customs data show, and exceeded 350,000 b/d in July, according to Vortexa estimates.

China's fuel demand is now picking up as flooding eases, potentially reducing export volumes. Water levels in the middle-lower reaches of Yangtze river have dipped below warning levels as rainfall has eased, boosting driving activity

A big fall in Singapore stocks has also supported the market. Light distillates stocks, consisting mainly of gasoline, fell by 1.936mn bl in the week to 5 August, the biggest draw in at least three years. Stocks are at a 2½-month low of 14.594mn bl.

Asia-Pacific's largest gasoline buyer Indonesia bought spot and term gasoline cargoes for August loading after having stayed out of the market for several months because of weaker domestic demand. State-owned refiner Pertamina has bought about 1.1mn bl of gasoline (35,000 b/d) for loading during August and also concluded term tenders for cargoes loading from August onwards. The Indonesian government imposed restrictions on car use to stem its Covid-19 outbreak, leading to an unprecedented slump in gasoline demand.

By Aldric Chew