Asia's gasoline crack recovered by 31% to reach a two-session high of $3.85 a barrel after it dived 37% to a 7-month low in the previous session as a deadly coronavirus spreading through the region dented demand. Industry sources said gasoline could still find support on possible refinery or secondary units' run cuts.
"Currently, the weakness in gasoline and gasoil cracks will have refiners considering run cuts gasoline production can be curbed to make way for VLSFO (Very Low Sulphur Fuel Oil) production," said Sandy Kwa of FGE. China will be adding even more refining capacity.
China had already added 800,000 barrels per day (bpd) of refining capacity last year - 80% of Britain's refinery throughput - and analysts expect a further 460,000 bpd to become operational in 2020. Asia's naphtha crack hit a two-week high as the fuel is structurally short in the region.
Despite petrochemical makers having cut runs by 5-10% and high volumes of cargoes arriving in January from the West including Europe and the Mediterranean, fundamentals were seen strong. India's BPCL sold 35,000 tonnes of naphtha on late Tuesday for Feb 9-10 loading from Mumbai to Vitol at premiums of $34 to $34.50 to its own price formula on a free-on-board (FOB) basis.
Although these were some 10% lower versus premiums BPCL fetched previously from Vitol for a Jan. 7-8 cargo, the fresh prices were sharply higher than what they were a year ago where cargoes sold for February 2019 loading from India barely exceed $25 a tonne.
South Korea's Hanwha Total was out to buy naphtha for first-half March arrival at Daesan but results were not immediately known. South Korea's third-biggest refiner, S-Oil, has signed a contract to supply up to 15 million barrels of naphtha and up to 8 million barrels of gasoline to Aramco Trading Singapore between January and December 2020.
Refineries under state oil and gas major Sinopec Corp are stepping up production of chemicals such as polypropylene (PP) and polyvinyl chloride (PVC), raw materials used for making masks, surgical garments and dripping bottles, following the coronavirus outbreak, the company said on Wednesday.
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