Japan's JXTG buys rare spot MR-sized gasoline cargo from South Korea: sources

Tokyo — Japan's largest refiner JXTG Nippon Oil & Energy has bought a spot MR-sized gasoline cargo from South Korea, market sources said, in a rare move at a time when Japanese refiners are increasingly cutting runs as the coronavirus pandemic erodes domestic oil demand.

JXTG is scheduled to load the MR gasoline cargo at the end of April from South Korea's largest refiner SK Energy, a source close to the deal told S&P Global Platts. The company has chartered one ship to get a gasoline cargo from South Korea, a source with direct knowledge of the matter told Platts.

A spokesman for JXTG Nippon Oil & Energy on Thursday declined to comment on specifics of its product deals.

JXTG typically exports -- not imports -- gasoline to balance its domestic supply and demand.

But the largest Japanese refiner was said to be cutting its gasoline production recently because of the bearish motor fuel demand in Japan and abroad, minimizing its exports, according to market sources.

So far one ship has been chartered for delivery of cargo by the end of this month and more will be imported depending on the requirement, the source with direct knowledge of the matter said. He said the importing is taking place because it is "economical and profitable" at the moment.

JXTG's rare gasoline imports came to light at a time when Japanese refiners are increasingly cutting refinery runs as domestic oil demand is hit by COVID-19, coupled with feasible import economics of the product from South Korea.

Crude runs

Japan's crude throughput fell 1.6% week on week to 2.66 million b/d over April 5-11, the Petroleum Association of Japan said Wednesday.

The latest weekly figure points to a refining capacity utilization rate of 75.6%, based on Japan's utilized design capacity of 3.5188 million b/d, down from 76.9% a week earlier.

The April 5-11 crude throughput was the lowest in 45 weeks, as it was last lower at 2.58 million b/d during May 26-June 1 during the spring refinery turnaround season.

Japan's domestic gasoline shipments stood at 19.62 million barrels in the four weeks to April 11, down 16.6% from the same period a year earlier, according to Platts calculations based on the PAJ data.

The spread between Japan's domestic gasoline rack prices in Chiba and Japan's import parity for gasoline from South Korea averaged Yen 16,200/kl ($23.81/b) so far in April as of Wednesday, up Yen 1,800/kl, or 12.5% from the March average, according to Platts data.

The import parity price is calculated at a premium to Mean of Platts Singapore 92 RON gasoline assessments, plus freight costs for MR vessel on the South Korea-Tokyo Bay, Japan route as well as insurance and import taxes.

Export outlets

The move by JXTG comes as South Korean refiners have been in a flurry to shift gasoline barrels overseas as domestic demand for oil products has been battered by its own battle against the coronavirus.

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

Some of these cargoes likely found their way into Singapore, with the city state taking in a total of around 73,823 mt of gasoline from South Korea in March, up from 54,018 mt a year earlier, according to Enterprise Singapore data.

"South Korean exports weighed on the [Asian] market around the same time as the uptick in Chinese gasoline exports [in March]," a Singapore-based source said.

China's oil product exports totaled 7.26 million mt in March, just slightly below the historical high of 7.31 million mt in November last year, Platts reported earlier.

Reflecting the poor state of gasoline fundamentals, the FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures averaged 57 cents/b in March, well below the $6.97/b average in February, Platts data showed.