Asia’s gasoline margins have recently swung back to a premium after mainly being at discounts since the start of 2019 as rising demand from Indonesia and upcoming refinery maintenance raised supply concerns.
The so-called gasoline crack spread, or the price difference for the fuel versus Brent crude oil, rose to nearly $1 a barrel on Tuesday, according to data on Refinitiv Eikon. The spread has rebounded from minus $2.85 on Jan. 30, the lowest since November 2011.
The spread typically trades at a premium to Brent but fell to a discount to the benchmark crude at the end of 2018 because of a supply glut of gasoline in Asia.
Some demand is now appearing to soak up some of that excess supply.
Indonesian state-owned energy firm Pertamina is seeking 2.1 million barrels of 88-octane gasoline for March delivery in two tenders, one being awarded on Feb. 21 and another on Feb. 28, according to the offer documents that were reviewed by Reuters.
Elections and lower fuel prices could be among the reasons behind the additional demand, said four traders who participate in the market, who added that Indonesia’s March gasoline imports could reach up to 12 million barrels versus a monthly average of 10 million barrels.
When asked about the higher imports, Pertamina’s spokesman said that “everything is in normal condition” and declined to comment further.
Pertamina is also seeking up to 250,000 barrels per month of 88-octane gasoline for April to June delivery in a tender that closed on Feb. 25 and will be awarded after March 1, according to the tender documents.
“March demand is strong and there are elections in Indonesia in April, followed by Ramadan in May. There are not a lot of bearish factors in the short-term as there are also refinery maintenance,” said a Singapore-based gasoline trader.
Refinery maintenance in the Asia-Pacific region will peak in April with 2.28 million barrels per day of crude distillation capacity down, according to data from Energy Aspects. That same month 365,000 bpd of fluid catalytic cracker capacity will also be shuttered, Energy Aspects shows.
Some of the Asian refineries undergoing maintenance include gasoline exporter Formosa Petrochemical Corp and South Korea’s GS Caltex, Reuters data showed.
But abundant supply will remain an issue once refineries complete their maintenance. Light distillate inventories, including gasoline and naphtha, in Asia’s refining and oil trading hub of Singapore have climbed to a record 17.29 million barrels.
“Although gasoline cracks should receive some support from scheduled spring refinery maintenance, the upside is capped by a massive supply overhang,” said Sri Paravaikkarasu, director for Asia Oil at consulting firm FGE.
“Globally, refinery runs should once again increase after spring maintenance concludes as refiners try to capitalize on robust middle distillate cracks.”
Paravaikkarasu expects the Singapore gasoline crack to inch upwards, but remain at a premium of between $3 to $5 barrel over Middle East benchmark Dubai crude during the summer demand season.
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