Production issues bolster Asia gasoline refining margin

The Asian gasoline refining margin rose to about a two-week high against a series of issues affecting gasoline production units in South Korea and Thailand.

The gasoline margin, or the Argus 92R Singapore gasoline price against Ice Brent, rose to $2.98/bl on 7 September. It was last higher on 25 August at $3.11/bl. Margins firmed as the market anticipated a smaller gasoline supply after South Korea's S-Oil and Thailand's IRPC shut their gasoline-producing units, said traders.

South Korean refiner S-Oil has unexpectedly shut its 76,000 b/d residual fluid catalytic cracker at its 580,000 b/d Onsan refinery because of technical problems caused by Typhoon Haishen.

The shutdown is expected to last about a month, which will reduce its gasoline offerings by about two to three medium-range cargoes, said traders. S-Oil typically offers about five to six medium-range gasoline cargoes a month and is already seeking to defer and cancel some of its cargo offerings, said traders, although it could not be confirmed with the company.

Thai refiner IRPC, the third largest refinery in Thailand, has also halted operations at its refinery's residual deep catalytic cracker (RDCC) after a fire hit the atmospheric residue desulphurisation (ARDS)at IRPC's 215,000 b/d Mab Ta Phut refinery complex late on 3 September, said market participants. The ARDS unit supplies the low-sulphur atmospheric tower bottoms (ATB) feedstock to the refinery's RDCC.

IRPC is still assessing the impact of the fire at the ARDS unit. But it may reduce availability of low-sulphur feedstock for downstream RDCC operations. The RDCC also supplies poly-gasoline, benzene and naphtha that goes into the gasoline blending pool, which will reduce gasoline production volumes.

Taiwan's private-sector refiner Formosa Petrochemical also reduced gasoline production volumes earlier in July after a fire hit its 540,000 b/d Mailiao refinery complex in the middle of July.

But the Asian gasoline market has taken a spate of bullish news in its stride against a back drop of subdued regional demand and ample supply from major gasoline exporter China. Asian margins, which are usually impacted by US RBOB gasoline values, also remained stable despite 2.2mn b/d of refining capacity in the direct path of the hurricane. This is about 12pc of total US capacity that was shut in ahead of landfall, with another 685,000 b/d of capacity further west reduced or idled.

Asia-Pacific's largest gasoline buyer Indonesia has increased its gasoline import demand but remains short of about 1mn-2mn bl in September, compared with typical import volumes of 9mn-10mn bl/month, said traders. The southeast Asian nation is expected to import about 8mn bl of gasoline in September as compared to about 9.5mn bl a year earlier.

China is also expected to maintain its strong export volumes. Gasoline exports held relatively strong in July at 307,000 b/d, a 42.6pc rebound from June, figures from China's general administration of customs show. Volumes are expected to remain above 300,000 b/d in August as well, according market participants.

By Aldric Chew