Asian gasoline margins rose sharply in the second half of June on expectations of a fall in gasoline cargoes from major supplier China.
The market shrugged off bearish news of renewed lockdowns in Malaysia and Vietnam and increasing Covid-19 cases in Indonesia. Further lockdowns in Asian nations will reduce demand for gasoline in the region.
Asian gasoline margins — the premium of the Argus 92R gasoline price to Ice Brent — rose from $4.60/bl on 1 June to $6.37/bl yesterday. The prompt 92R gasoline swap against forward months also climbed steadily from a contango structure on 8 June to $0.50/bl in backwardation yesterday.
Prices have firmed across the curve as market participants are anticipating a demand rebound in the second half of 2021. A group of traders think demand has "bottomed out" and the next logical move will be up, an analyst said. The August-September spread and September-October spread were at around $0.55/bl and $0.62/bl respectively on 16 June but were bid up to about $0.80/bl and $0.95/bl respectively yesterday, according to broker data.
A fall in gasoline exports from China is supporting prices, with reduced spot offers from Chinese state-controlled refiners, traders said. Chinese refiners Wepec, Sinochem and CNOOC have yet to offer any July-loading spot cargoes, according Argus' records. The market is also anticipating a big reduction in gasoline export quotas, which will be announced soon, traders said.
The reduction in spot availability in July has made it harder to fulfil August requirements, a gasoline buyer said.
Gasoline exports from China are expected to remain low in July, leading to some tightness for August-delivery cargoes, said market participants. China's July exports are estimated to be below 1mn t (273,000 b/d), similar to June export estimates but far lower than gasoline exports in May. China's gasoline exports in May reached 422,500 b/d, up by just 2pc from April but more than double year-earlier volumes.
The gasoline market was on a downward trend in mid-June with cargoes destined for Malaysia being deferred because of reduced domestic demand following an extension of the country's Covid-19 movement control order.
The market has shrugged this off and is now focused on the reduction in Chinese supplies. But rising Covid-19 cases in Indonesia, Asia-Pacific's largest gasoline buyer, will be hard to ignore. The southeast Asian nation posted a record 20,574 of daily cases yesterday, according to the World Health Organization. The surge in cases could lead to a potential lockdown in the country, which will pressure gasoline demand.
