Asia's gasoline crack rose for the third day on Friday to hit a 2-1/2 week high of $5.20 a barrel, supported by run cuts made in gasoline-producing units in North Asia. Refiners in North Asia such as South Korea and Taiwan are cashing in on strong margins for very low sulphur fuel oil (VLSFO) and are selling the fuel instead of using it as raw to make petrol via residue fluid catalytic crackers (RFCCs).
The profit-margins for VLSFO is currently at least 4 times higher than for gasoline. Taiwan's Formosa, for instance, has been gradually raising its VLSFO exports from fourth quarter of 2019 to February 2020. In China, Asia's top gasoline exporter, state-owned refineries were heard to be either contemplating on cutting runs or in the midst of reducing throughput, said a note by FGE.
"Independents have already cut back, and in fact some have halted production because their product storage tanks are full," the note said.
Demand wise, FGE estimated that 230,000 barrels per day (bpd) of gasoline could be knocked out on average from February to March in China as a deadly coronavirus has discouraged travelling and keeping people homebound. Hubei alone will lose some 50,000 bpd of demand, the consultancy firm added.
Gasoline stocks held independently at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub eased 2.58% to reach a five-week low of 1.019 million tonnes in the week to Thursday, data from Dutch consultancy Insights Global showed. Some of these cargoes were moving into United Arab Emirates (UAE), the data showed.
Asia's naphtha crack fell to a two-session low of $85.50 a tonne as spot demand was mostly muted following purchases from South Korea's Hanwha Total and Japan's Idemitsu this week. Most of the Asian naphtha crackers which have cut runs by an average of 5%-10% have no plans on restoring their throughput with the exception of Japan's JXTG which has a scheduled maintenance at one of its two crackers in February.
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