Myanmar's political woes may apply brakes to gasoline inflows

Singapore — The recent military coup in Myanmar is expected to inject headwinds into the Asian gasoline market as the political situation has raised fears of slowing imports in the near term, potentially squeezing domestic supplies in a country that has limited production bandwidth of its own.

Any slowdown in purchases by Myanmar may add to the problem of plenty in Asia where a lack of demand is already leading to a build-up of inventories, pushing down Asian gasoline crack spreads to the lowest levels this year.

The coup, which saw Myanmar's military, called The Tatmadaw, seizing power and detaining the country's top leaders, threatens to cast a shadow on commodity trade flows as well as energy investment as companies assess the risk of operating amid heightened political uncertainty and the potential for renewed international sanctions.

Myanmar is one of Southeast Asia's key buyers of gasoline, with the country's growing economy as well as poor domestic refining landscape making it increasingly reliant on motor fuel imports. At present, Myanmar only operates its small 6,000 b/d Chauk refinery in the Magway region, after having shut its other Thanlyin refinery in Yangon.

Myanmar takes on average an equivalent of five to six medium range tankers worth of gasoline cargoes per month, amounting to between 175,000 mt to 210,000 mt, according to several industry sources.

Most of these cargoes arrive from Singapore, the region's largest oil trading hub, with the city state having exported total of 176,475 mt of gasoline to Myanmar over the period of Dec. 31 to Feb. 3, data from Enterprise Singapore showed.

Feb, Mar volumes to slow

Amid the ongoing developments in Myanmar, buyers from the country were heard cutting back on incremental volumes of gasoline imports in February, and were mulling further cuts in March should the situation get worse.

"There had been some improvement to demand [from Myanmar] over the past few months. This does not seem to be the case now," a third market source said

Agreeing, the second source said that should Myanmar gasoline demand slow as a result of the coup, Asian gasoline demand will be dealt another blow, with demand already being sluggish against a backdrop of poor Indonesian and Malaysian demand.

The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures against the backdrop of poor demand and a buildup in spot supply was even noted to have hit a year-to-date week low at the close of Asian trade Feb. 11, being assessed at $2.91/b, S&P Global Platts data showed.

The uncertain domestic situation in fact has already caused issues for gasoline suppliers of Myanmar, who face operational uncertainty with regard to February delivery cargoes, said several market sources.

The buyers in Myanmar were uncontactable," one Singapore-based trader said, adding that there might be disruptions to port activities if the situation gets worse. "This will impact firms with cargoes already set to discharge."

Companies adopt cautious approach

Puma Energy, which operates the largest petroleum products import terminal in Myanmar, has already announced that it would be temporarily suspending operations of transport oil products.

Puma Energy, a mid-to-downstream oil company partly owned by commodity trader Trafigura, operates an oil products terminal in the Thilawa special economic zone on the outskirts of Yangon, Myanmar's most populous city.

US President Joe Biden Feb. 10 announced that sanctions would be placed on Myanmar in response to the coup, with the sanctions freezing some $1 billion in Burmese funds being held in the US.

"US sanctions will make it more complicated to move cargoes to Myanmar as traders now have to deal with payment issues," a second trader said.

"The full impact is difficult to quantify but there will be some long-term impact on Asian gasoline if foreign investment is affected," said Alexander Yap, Senior Analyst at S&P Global Platts Analytics.

Meanwhile, Myanmar's political crisis have also kept refiners and petrochemical companies in Thailand on their toes, with Thai traders carefully assessing the potential logistical constraints as well as possible trade hurdles as economic sanctions are imposed on Yangon.

Thailand is a regular buyer of gas condensate produced in Myanmar and the country is one of major motor fuel suppliers to its neighbor. Thailand exported more than 7,000 b/d of automotive diesel to Myanmar in 2019 and 2020, according to data from the country's customs department.

"What we are most worried about is the possible economic sanctions against Yangon as any trade hurdles with Myanmar could hurt Thailand's motor fuel sales within the Southeast Asian market," said a middle distillates marketing manager at PTT.