Asian gas oil eases on Formosa restart

SINGAPORE: The Asian gas oil market eased on Tuesday, with both its prompt timespreads and crack slipping, as news of partial restart of Formosa's Mailiao refinery in Taiwan weighed on sentiment.

Fuel oil and naphtha timespreads held steady at strong levels, supported by tighter supplies, while the fixed-price swaps contracts gained across their 12-month forward curve, as Brent crude recovered $2.40 to $108.85 a barrel by 0430 GMT, versus the previous 0830 GMT Asian close on Monday.

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GAS OIL SLIPS

Gas oil's September/October timespread widened to a contango of 8 cents a barrel, down 5 cents, while October/November was at a contango of 1 cent, down from parity.

The product's September crack was 13 cents lower at a premium of $17.72, while the October crack was also 8 cents weaker at a premium of $17.88 a barrel to Dubai crude.

Regional supplies look set to rise as Taiwan's Formosa Petrochemical Corp partially restarted its Mailiao refinery, with one of its three crude distillation units (CDU) back online late Friday, traders said.

Though plans for the resumption of diesel exports from the Taiwanese refiner, estimated at 800,000 tonnes a month, are still unclear, traders are anticipating that exports could resume, at the earliest, by September.

Fixed-priced contracts for September and October were valued at $122.15 and $122.23 a barrel, respectively, up $2.25-$2.30 or around 1.8-1.9 percent.

FUEL OIL TIMESPREADS HOLD STEADY

Fuel oil's September/October timespread was a slight 13 cents lower at a backwardation of $5.38, while the October/November spread was unchanged at a backwardation of $3.75 a tonne.

The front-month timespread has remained firmly above $5.00 tonne since last Wednesday, while the October/September spread has stayed rangebound at $3.75-$4.00 in the past two sessions, supported by a tightly-supplied market for September.

Western arbitrage arrivals are currently at 2.7-2.8 million tonnes for September, in addition to lower Iranian exports, though inflows from the West and Iran for October may be significantly higher as the West-to-East arbitrage window remains open, while Iran is expected to resolve its natural gas supply disruptions by early October, at the latest.

The September crack widened 46 cents to a discount of $5.41 a barrel to Dubai crude, while the October discount also weakened 44 cents to $6.16.

September and October 180-cst fixed-price swaps were valued at $643.63 and $638.25 a tonne, up $12.50-$12.63 or around two percent.

NAPHTHA TIMESPREADS HOLD AT 3-MTH HIGH

Naphtha CFR Japan September/October edged up 25 cents to a backwardation of $3.50, while October/November backwardation was unchanged at $3.50 a tonne.

The September crack to Brent widened a slight 4 cents to a discount of $4.46 a barrel, while the October contract was unchanged at minus $4.45.

The prompt timespreads have held onto their gains, hovering at their strongest levels since May on tighter supplies.

European naphtha inflow has been limited, as naphtha cargoes get drawn to Brazil instead to meet the Central American country's demand for gasoline.

India's September exports are also expected to be capped around 850,000 tonnes, below the monthly average for the first eight months at about 900,000 tonnes, as refiners Essar and HPCL commence their planned maintenance.

The CFR Japan September swap gained $21.50 to $943.00 a tonne, while the FOB Singapore September swap was $2.15 higher at $102.50 a barrel.

Copyright Reuters, 2011