JXTG's gasoline cargo purchase from Singapore signals demand recovery: sources

Tokyo — Gasoline demand in Japan is showing signs of recovery following the lifting of the state of emergency, prompting the country's largest refiner, JXTG Nippon Oil & Energy, to snap up at least one MR-sized gasoline cargo from Singapore, believed to be the first purchase from overseas in months.

JXTG bought one gasoline cargo loading in June in Singapore, a source familiar with the matter said June 17, without giving further details.

A spokeswoman for JXTG Nippon Oil & Energy on June 17 declined to comment on specifics of its product deals.

JXTG's purchase comes on the heels of a larger than expected domestic demand recovery for gasoline in recent weeks following the lifting on May 25 of the state of emergency, which was declared April 7 to curb the spread of the coronavirus pandemic.

Trafigura will use its own ship, the Olaf, for loading a 35,000 mt cargo in June for Kawasaki delivery, shipping brokers said. The Olaf, which is in Singapore, is scheduled to arrive in Kawasaki on June 25, according to S&P Global Platts trade flow software cFlow. Trafigura executives could not be immediately reached for comment.

Currently, JXTG's 235,000 b/d Kawasaki refinery is shut for scheduled maintenance work. The 65,000 b/d No. 3 crude distillation unit at Kawasaki is due to be restarted in late June, with the 170,000 b/d No. 2 CDU restarting in early July.

Net importer in April

JXTG last bought at least one spot MR-sized gasoline cargo loading in April from South Korea when Japanese refiners were increasingly cutting runs as the coronavirus pandemic eroded domestic oil demand, as well as the import economics for product from the country.

Together with increased imports by Cosmo Oil, Japan was a net importer of gasoline in April as refiners raised oil product imports from neighboring countries because of refinery run cuts in response to plummeting domestic demand.

Japan imported an average of 68,571 b/d of gasoline in April, more than triple the 19,569 b/d a year earlier, and flipped to being a net importer after exports came to 44,856 b/d, according to the Ministry of Economy, Trade and Industry data.

At the start of June, however, Japan's crude throughput rose for the first time in seven weeks, with domestic gasoline demand recovering to pre-state of emergency levels.

Japan's estimated gasoline shipments rose 3.8% week on week to 5.23 million barrels in the June 7-13 week, staying above the pre-state of emergency level of 4.72 million barrels over April 5-11, according to calculations by Platts based on Petroleum Association of Japan data.

On June 17, Japan's domestic gasoline rack prices in Chiba, east of Tokyo Bay, stood at Yen 37,300/kiloliter ($55.21/b), up 33% or Yen 9,200/kiloliter from May 25 when the state of emergency was lifted, Platts data showed.

Regional recovery

Japan's demand recovery follows a trend in the wider Asian gasoline market, which has been heavily supported of late by an uptick in driving activity in the region.

The latter has especially seen sustained growth since mid-May, with most Southeast Asian countries such as Malaysia, Vietnam, Cambodia and Myanmar easing lockdowns and reopening their domestic economies.

Even Singapore -- the region's oil trading hub -- is set to move into its next phase of easing on June 19, after having been in partial lockdown since mid-March.

Against the backdrop of improved demand, supply-side fundamentals have similarly recovered, with China and South Korea having lowered their export volumes in May and June.

"We are seeing a converging demand-supply dynamic now. Supplies are not tight but the amount of replacement barrels is not as much," a Singapore-based trade source said.

"Vietnam is coming out to buy, and without South Korean barrels, they are forced to take the cargoes from alternate sources such as Singapore," a second source said.

Reflecting the supported fundamentals, the FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures was assessed at plus $4.07/b at the close of Asian trade on June 17, sharply higher than the minus $1.46/b it had averaged in May, Platts data showed.