66 / 97
Product Markets and Refinery Operations
64
OPEC Monthly Oil Market Report – June 2016
Asian market
The Asian market strengthened slightly in May, supported by stronger regional demand
amid the peaking of the refinery maintenance season in the region. The uptick in the
margins was limited by the pressure exerted by the oversupply environment.
Despite the heavy maintenance season, the
gasoline
market continued weak,
pressured by ample supply in the region, with volumes in floating storage continuing to
keep the market under pressure. Higher exports reported from northeast Asian
refineries – mainly from Japan and the Shandong province of China – have been
outweighing the higher regional demand being reported from India, Pakistan and
Indonesia. The gasoline crack spread against Oman crude in Singapore averaged
$12/b in May, losing 40¢ versus the previous month’s level. Losses were capped by
expectations that increasing seasonal demand amid heavy maintenance could tighten
the market in the coming weeks.
The Singapore
naphtha
crack continued its downward trend, losing around $3/b over
the month due to demand being impacted by the heavy petrochemical steam cracker
maintenance. The LPG discount to naphtha has encouraged switching to LPG
feedstock, which has also pressured the market.
Graph 6.5: Singapore crack spread vs. Oman, 2015-2016
At the
middle of the barrel
, the gasoil crack spread continued relatively steady, getting
support from lower supplies seen from India due to heavy maintenance amid strong
demand. This has allowed the gasoil crack spread to hit its highest value seen this
year. Demand in the region remained strong in several countries, mainly India,
Vietnam, Indonesia and Pakistan, while some arbitrage opportunities to West Africa
and Europe also supported the gasoil market in the region.
The gasoil crack spread in Singapore against Oman averaged around $12/b in May,
gaining around $2 versus the previous month’s level. Although the drought suffered by
several countries has been a supportive factor, additional gains were capped by
concerns about potential downturn in demand with the upcoming monsoon season in
the region.
The Asian
fuel oil
market was relatively stable during May as strong demand reported
from South Korea and Pakistan offset the pressure coming from high inventories in
Singapore and lower Chinese fuel oil demand. The fuel oil crack spread in Singapore
-20
-10
0
10
20
30
-20
-10
0
10
20
30
May 15
Jun 15
Jul 15
Aug 15
Sep 15
Oct 15
Nov 15
Dec 15
Jan 16
Feb 16
Mar 16
Apr 16
May 16
Jun 16
US$/b
US$/b
Premium gasoline
Jet/Kerosene
Gasoil
Fuel oil
Sources: Argus Media and OPEC Secretariat.