Prompt needs lift Asian gasoline margins to record high

Asian gasoline margins have risen further to a new record high on the back of prompt requirements from India and expectations of lower exports from China.

Asian gasoline margins, or the Argus 92R gasoline price against Ice Brent crude, rose to a new all-time high of $37.50/bl on 21 June. The last time margins rose past $37/bl was on 20 May at $37.27/bl, according to Argus records. The prompt-month price against the forward month tracked the increase, reaching a new high of $7.55/bl in backwardation.

Margins rose in response to prompt requirements from Indian state-run refiners Hindustan Petroleum (HPCL) and IOC, as the country faces fuel shortages despite an earlier government assurance that stocks are sufficient. But there were fresh discussions about China's July gasoline exports being much lower than June levels, market participants said.

IOC and HPCL emerged these few days to buy 150,000-158,000t (1.27mn-1.34mn bl) of gasoline for very prompt delivery. The prompt demand comes on the back of domestic fuel shortages, an unexpected issue at a gasoline-producing unit at IOC's 300,000 b/d Paradip refinery and private-sector refiners exporting more gasoline instead of selling domestically because of strong international prices, market participants said.

Gasoline consumption was also firm in the country, averaging 774,000 b/d during 1-14 June compared with 678,500 b/d in June last year, according to preliminary data from state-controlled refiners that control around 90pc of India's fuels market.

There is also fresh "word on the street" that Chinese state-controlled refiner Sinopec is expected to export much lower gasoline volumes in July because of a refinery issue, a Singapore-based gasoline trader said. The lower than expected Chinese gasoline export volume is the reason why the market is going through the roof, another gasoline trader said. Chinese gasoline exports in May were at just 229,000 b/d compared with 422,500 b/d in the same month last year.

Asian gasoline market fundamentals have been strong lately with demand ramping up ahead of the peak summer driving season in the US and Europe, coupled with refinery issues in India, South Korea, Vietnam and Kuwait.

There is little downward pressure on gasoline prices as traders are already leaning towards a strong market and any positive news could propel prices further, according to market participants.

By Aldric Chew