Singapore's gasoline and naphtha refinery margins rose this week to multi-month highs, supported by refinery maintenance and strong demand, helping overall refinery margins in Singapore to outperform those in Europe and North America. Refinery margins, known as cracks, for naphtha rose above $35 per tonne for the first time since July, almost quadrupling from their four-year lows in mid-August.
Singapore gasoline cracks have risen almost five-fold since July to around $8.50 per barrel, their highest level since May, but dipped slightly on Friday. Traders said that the improved margins were a result of a tighter market.
Supplies are tighter due to refinery maintenance season, and demand is pretty strong now, exemplified by China's jump in car sales," one trader said.
Japan's JX Negishi, South Korea's S-Oil, SK Incheon Petrochem and Taiwan's Formosa, among others, have planned maintenance in September or October.
In India, Hindustan Petroleum Corp Ltd shut a unit at its 130,000 barrels per day (bpd) refinery in Mumbai last week due to a technical glitch, and has since been importing gasoline, the head of its refineries told Reuters on Friday.
Meanwhile, passenger vehicle sales in China - where almost all passenger vehicles run on gasoline - rose 24.5 percent in August from a year earlier, the China Passenger Car Association (CPCA) said this week. For January-August, passenger car sales rose 12.7 percent versus the same period in 2015, it said.
Driven in part by strong car sales, China's gasoline demand grew by 15 percent in the first half of the year, said Li Zhenguang, senior analyst at Sinopec's Economic Development and Research Institute during Singapore's APPEC conference this week.
The short-term outlook is also firm due to high gasoline consumption as China heads to a week-long national holiday in October.
The strong gasoline and naphtha cracks helped lift Singapore's overall refining margins to just under $6 per barrel, more than double from their two-year low reached in August.
"Refining margins were mixed and highly volatile over the past week, ranging from -26 percent in the US Gulf Coast to +28 percent in Singapore," US investment bank Jefferies said on Friday in a note to clients.
Despite this, Asia remains in a fuel products supply overhang, affecting products like naphtha, diesel and gasoline, because refiners have produced more fuel than the market can absorb. China, driven by the rise of independent refineries, flipped into a net exporter of refined products in July for the first time since at least 2013, Reuters calculations based on customs data showed.
The easy availability of liquefied petroleum gas (LPG) as a feedstock this year was also hurting naphtha sellers because between 5 percent and 15 percent of naphtha can be replaced by LPG in some of Asia's crackers.