Asia's premium for front-month second-half August to second-half September fell 75 cents to $1 a tonne on Thursday, making this the lowest intermonth premium since January 19 as buyers were slow to commit to second-half August cargoes due to ample supplies. Similarly, Asia's gasoline crack also took a hit, falling by more than 10 percent to $12.93 a barrel as buyers retreated from the Singapore cash market.
Peak gasoline demand could be slowly tapering off as the Muslim fasting month ends in about two weeks, but traders expect demand from India and possibly fewer exports from China to cushion any large drop in crack values. The weaker demand outlook for light ends stocks, coupled with lower buying interest seen for other oil products, is expected to hit Asia's refining margins which are currently already at their lowest in 2015.
Asian refining margins enjoyed a stellar run in the first half of this year on weak oil prices and hit a two-year top above $10 per barrel in June. But they have almost halved this week to $5.60 with supply of refined products from traditional importers in the Middle East building up. Refining margins could fall by another 20-30 percent. India's Bharat Petroleum Corp (BPCL) has an outstanding tender to sell 30,000 tonnes of naphtha for July 23-25 loading from Mumbai through a tender due to be awarded on late Thursday.
Weak fundamentals have pressured prices and traders expect this to impact tenders this week. For instance, Essar Oil saw its sales premium for a July naphtha cargo done at $14 to $15 a tonne above Middle East quotes on a free-on-board (FOB) basis this week. This was the lowest spot price the refiner had received in five months.
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