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Product Markets and Refinery Operations

60

OPEC Monthly Oil Market Report – August 2017

Asian market

The Asian market continued to be bullish in July, due to strengthening in all product crack spreads, with the

exception of the naphtha and fuel oil crack spreads, which declined marginally.

Graph 6 - 5: Singapore crack spread vs. Oman

The Singapore

naphtha

crack declined compared with June levels, losing around $0.15/b over the month as

the rise in naphtha value didn’t match increased feedstock prices, despite positive factors such as firm

demand. Additional naphtha cracking capacities came out of maintenance and increased demand in Asia, for

example, the 495,000 mt/y Mizushima naphtha cracker in Japan returned from maintenance. A stronger

gasoline market, rising reforming spread and an increase in naphtha imports into China were also positive

factors for the naphtha crack spread in July.

The Asian

gasoline

crack spread against Oman crude in Singapore averaged $14.1/b in July, up by $0.9/b

compared with the previous month’s level. The

gasoline

market continued to strengthen during July,

supported by healthy demand and seasonal growth in Japanese demand. Healthy demand growth in India in

combination with limited supply reduced export levels over the month, further supporting the gasoline crack

spread.

At the

middle of the barrel

, the gasoil crack spread exhibited a solid rise, adding $1.9/b compared with June

to reach $13.7/b in July. The additional supply was outweighed by higher regional demand, with Vietnam

absorbing extra volumes in the market due to maintenance at the Dung Quat refinery. Hot weather in Japan

also propelled extra consumption in the power generation sector, with demand increasing to its highest level

since March, based on preliminary data.

At the

bottom of the barrel

, the Asian fuel oil crack spread in Singapore against Oman averaged about

minus $1.5/b in July, declining by $0.3/b from the previous month. The fuel oil market weakened as bunker

demand slowed, overall Asian demand eased from summer peak levels, Singapore fuel oil stocks increased

to a three-month high and increasing arbitrage volumes m-o-m came in from the West.

-20

-10

0

10

20

-20

-10

0

10

20

Jul 16

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

US$/b

US$/b

Premium gasoline

Jet/Kerosene

Gasoil

Fuel oil

Sources: Argus Media and OPEC Secretariat.