Factbox: Asian fuel suppliers desperate to get rid of excess supplies

Singapore — Refiners across Asia have been accumulating unwanted gasoline, diesel and jet fuel inventories since early February as consumer demand faltered following the coronavirus outbreak.

Major fuel exporters including China, South Korea and India have been actively seeking overseas outlets since late January to clear their excess supplies at home.

Indian refiners, for one, have recently raised exports for prompt refined oil product cargoes, seeking buyers to offload supply quickly in a bid to offset a worsening demand-supply balance amid a nationwide lockdown.

South Korean and Chinese gasoline, diesel and jet fuel producers have been focusing more on exports than domestic sales as consumer demand in North Asia has tumbled over the past several weeks, with transportation coming to a halt due to COVID-19.

However, state-run Chinese refining giant Sinopec said it sees limited oil product exports in Q2 as the number of willing buyers in the international market has dwindled following the pandemic.

Reflecting the double whammy of tepid consumer demand and excess supplies hitting the regional spot market, Asian oil product market structures fell deep into contango in early March, and has remained firmly entrenched in negative territory ever since.

"Asian refiners are reducing runs in line with lower demand within the region, as well as an inability to export surplus gasoline and middle distillates outside the region," S&P Global Platts Analytics' senior analyst Alex Yap said.

Asia's oil demand is expected to contract by 3 million b/d year on year in the second-quarter, while refinery runs could fall by 4 million b/d over the same period, according to Platts Analytics.

Trade flows

India

**India's largest refiner -- Indian Oil Corp. --- was seen offering up to 64,000 mt of 92 RON gasoline, with the first 41,000-42,000 mt clip set to be loaded over April 5-10 from either Haldia/Paradip.

**IOC also offered up to 62,000 mt of 10 ppm sulfur gasoil split for loading from Haldia and Paradip over April 10-15, as well as 25,000 mt of jet A-1 fuel for loading from Paradip over April 8-9.

**Fellow refiner Bharat Petroleum Corp. has also moved quickly, with its recent tender offering up to 40,000 mt of 10 ppm sulfur gasoil scheduled to load from Mumbai over H1 April.

China

**China's gasoline exports to the United Arab Emirates surged to 157,000 mt in the January-February period, making the Middle Eastern nation one of the top five motor fuel buyers, data from China's General Administration of Customs showed.

**China also found an outlet in Central America during the first two months, with Mexico making the top 10 gasoline buyers' list as it received 70,000 mt.

**Overall, East Asian recipients took 87% of China's total outflows over January-February 2020, lower than the 91.6% ratio for the shipments made over January-February 2019, a clear indication that China has been actively seeking a wide range of outlets to clear excess supplies at home.

**However, Sinopec's unit Guangzhou Petrochemical said its jet fuel exports could fall to around 30,000 mt in April, from the normal 100,000 mt/month, due to faltering buying interest in the international market.

**State-owned integrated oil and gas giant PetroChina also slashed its refineries' April export target, from March, including cutting Liaoyang Petrochemical's by half to 60,000 mt and reducing West Pacific Petrochemical Corp.'s, or Wepec's, by 22% to 350,000 mt.

South Korea

**South Korea exported 8.4 million barrels of gasoline in February, up 21% from 6.94 million barrels a year ago, and up 16.7% from 7.2 million barrels in January, latest data from state-run Korea National Oil Corp. showed.

**Reflecting the downbeat outlook for the aviation industry, South Korea's jet fuel exports could fall 21% year on year to around 45 million barrels in H1, according to traders and fuel marketing sources at major South Korean refiners SK Innovation, S-Oil Corp, GS Caltex and Hyundai Oilbank, surveyed by Platts.

Prices

**The front-month May and second-month June FOB Singapore jet fuel/kerosene swap spread was assessed at minus $3.55/b at the Asian close on Tuesday. Based on S&P Global Platts data that goes as far back as March 2001, the spread was at a record low. It was assessed at minus $3.51/b on Wednesday.

**The FOB Singapore gasoil 10 ppm May/June swap spread was assessed at minus $1.78/b on Tuesday, marking the lowest level since November 22, 2012 when it was assessed at minus $1.83/b. The spread was assessed at minus $1.65/b on Wednesday.

**The FOB Singapore 92 RON gasoline May/June swap spread tumbled to a record low of minus $3.30/b on Wednesday.

Infrastructure

**IOC has reduced run rates at its nine refineries by 20%-30% in April, from March.

**India's No. 2 refiner Bharat Petroleum Corp. has cut crude throughput by 30% at its 310,000 b/d Kochi refinery this month and 241,000 b/d Mumbai refinery.

**South Korea's Hyundai Oilbank, which runs two CDUs with 520,000 b/d and 170,000 b/d condensate splitters, said it has lowered its crude run rate to 90% in late March from above 96% previously.

**SK Innovation's main refining unit SK Energy, with a combined capacity of 840,000 b/d, has cut its crude run rate to 85% in March, compared with 95% a year ago, and it will further lower run rate in April and beyond.