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Singapore — Indian private refiner Nayara Energy is the next company to have adjusted terms in its tender documents, as more refiners seek to protect themselves from the possibility of negative prices, industry sources with knowledge of the matter told S&P Global Platts.

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In its latest gasoline offer this week, the company added a clause stating that "[the] price formula for any day where the sum of the published price quotation and the premium/discount mentioned is less than zero, the price for that day would be treated zero," according to the tender document seen by Platts.

The new clause sets a floor for the cargo price at zero, thereby protecting its value to the refiner in the event of sharp dips to outright prices, said sources.

The tender offered up to 60,000 mt of 92 RON gasoline for loading over June 4-8 from Vadinar and closed Tuesday, though results of the tender were still unknown.

Nayara's move comes amid concerns that prices of refined oil products could touch historic lows, after most parts of the world saw economic activity grind to a halt on nationwide COVID-19 lockdowns.

In addition, freight rates had also soared to record highs, with traders scrambling to obtain cargoes for floating storage, leaving others needing to fight for limited supply of tonnage.

Both factors contributed to concerns that the Mean of Platts Arab Gulf gasoline assessment, which is calculated as a freight netback from the Mean of Singapore gasoline assessment, could hit negative territory.

To some companies in India and the Middle East that use MOPAG to price their cargoes, negative prices would erase their cargo values, said sources.

Earlier, fellow Indian refiner Bharat Petroleum Corp. Ltd. took steps to mitigate price volatility, adapting its previous tender for 35,000 mt of naphtha for mid-May loading to encompass a wider pricing period of 15 days from the bill of lading, as opposed to the previous norm of five days.

Indian refiners also considered using a 30-day pricing period for tender cargo sales, said an Indian refiner source.

On naphtha, FOB AG cargo prices are assessed as a freight netback from the C+F Japan cargo price. There was a significant upswing in freight costs, pushing FOB AG cargo prices below the transhipment cost from April 21-May 5, showed Platts data.

Naphtha FOB AG cargo fell to $53.185/mt on April 28, an all-time low since Platts began publishing the assessment over four decades ago. The price has since rebounded at $132.15/mt at Tuesday's Asian close as crude futures edged up CFR Japan cargo prices, and freight costs eased.


In light of Nayara's move, participants in Singapore were confident that gasoline prices in Asia and the Middle East will retain their value.

"The gasoline market is recovering already because of the stronger US RBOB. So I think that the concerns of negative prices are not that big anymore," said one Singapore-based source.

The price of FOB Singapore 92 RON gasoline, the most liquid gasoline benchmark in Asia, was assessed at $29.07/b at the 0830 GMT close of Asian trade Tuesday, a 49.5% jump from the April average at $19.44/b, showed Platts data.

Agreeing, another source pointed at easing freight rates as well as a pickup in domestic demand in some countries, which could help support overall fundamentals and trade flows.

"I feel that the worst is behind us already. But we need to wait and see. There is still too much cargoes in Asia," added another source.