Outright Asian oil product swaps were mostly higher on Monday, while gas oil cracks weakened in anticipation of cooling Chinese demand just ahead of the Lunar New Year holidays. Front-month gas oil swaps rose 70 cents to $104.10 a barrel, while its February crack narrowed 63 cents to $18.24.
Demand remains strong, but an anticipated thinning of demand from China, ahead of their annual holiday celebrations in early February could see crack values weaken further.
"Regional refiners are cutting runs, and you are also seeing that in the United States, so to some extent the market is still concerned about supply, especially with demand generally being strong," a trader said. February fuel oil swaps fell $3.75 to $458.00 a tonne, while the February crack stayed weak with discounts pegged at $14.00.
The prospect of Chinese demand picking up remained bleak, with the only outlet being the regional marine fuels market. "Without a secondary outlet, primary demand is still coming from the bunkers market, which caps any upside for the market going forward," a trader said.
About 3 million tonnes of fuel oil from the West are slated to arrive in Asia next month. February naphtha swaps were 50 cents higher at $91.30 a tonne, while ICE/Brent naphtha was pegged at around $171.