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Singapore gasoline cash premium falls to one-year low on ample supply

Singapore — The premium of physical FOB Singapore 92 RON gasoline cargoes over the MOPS strip sank to minus $1.01/b Thursday, the lowest since January 23, 2015.

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Selling interests for the grade were particularly strong during this week's Platts Market on Close assessment process.

That also sent the benchmark 92 RON gasoline crack against front-month Brent futures down to $12.45/b, from $16.20/b, the last time it saw a rise.

The recent weakness in physical cargo prices came as earlier-fixed Western cargoes arriving in Asia exacerbated the supply glut, a trader said.

Arbitrage "cargoes are flooding this market," a trader in Singapore said. Western "refiners are maximizing light distillates production."

Still, the European cargoes are likely to have limited outlets without further blending because they are lower octanes, below 90 RON, market participants said.

An oil major is also bringing over significant amount of US origin cargoes with unknown specifications, market participants said.

Regional supplies are also saturating the market as refineries across Asia have been running at high rates since Q2 2015 to produce more gasoline and cash in on high margins.

Asian gasoline demand rose sharply in the past year amid relatively lower pump station prices as well as policy changes in major consuming countries, enticing refineries to maximize gasoline production and limit turnarounds.

Barrels from North Asian refineries, particularly China, have swamped Asia's oil trading hub Singapore, which saw its light distillate stocks, mainly gasoline and blendstocks, rise about 5% month on month to 13.75 million barrels month to date, the highest on record.

China's gasoline exports are expected to stay at record-high levels in January, as producers were given massive export quotas for Q1 2016 to ease the domestic oversupply.

More than half of China's exports typically head to Singapore.

The first-month/second-month 92 RON gasoline swap spread widened its contango to minus 85 cents/b in the last two trading sessions, the widest since December 8, when it was assessed at minus 95 cents/b.

The deep contango structure signals severe oversupply of prompt cargoes.

--Dexter Wang,
--Edited by Meghan Gordon,