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FUJAIRAH DATA: Oil product stocks retreat across the board, light distillates near record low

Highlights

Sri Lanka set for first naphtha shipment: Kpler

South Korea may need more naphtha for new crackers

Light distillates short of record low of 4.198 mil bbls seen in Oct. 2020

Oil product inventories at Fujairah on the UAE's east coast slipped to a two-week low as light distillates shrank to the smallest since the record low in October 2020 on growing demand for naphtha in Asia and refinery issues in Saudi Arabia and the UAE.

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The total inventory was 22.335 million barrels as of June 7, down 5.7% from a week earlier and the lowest since May 24, according to Fujairah Oil Industry Zone data provided exclusively on June 9 to S&P Global Platts. All categories showed declines, with light distillates such as gasoline and naphtha down 4.7% to 4.978 million barrels, the lowest since Oct. 26, 2020, when they hit a record low of 4.198 million barrels. Middle distillates and heavy distillates also dropped to two-week lows.

Naphtha exports from Fujairah were 69,000 b/d in May, the biggest monthly total since February 2019, according to commodity data company Kpler. Shipments to Japan averaged a record 29,500 b/d for May and Sri Lanka was set to get its first naphtha cargo from Fujairah, according to Kpler. Taiwan, South Korea and Malaysia also took in the feedstock last month. Naphtha is used as a petrochemicals feedstock and in gasoline blending. Also, according to market sources, the RFCC unit in Ruwais in the UAE is experiencing technical issues and as a result ADNOC is buying gasoline, Platts reported June 9 in an analysis of the inventories.

Fujairah's naphtha exports rose sharply by 34.5% from April mainly due to a 59.46% month on month rise in shipments to Japan as domestic supply in the country was lower from refinery maintenance amid a time of high steam cracker run rates due to positive margins. Idemitsu Kosan, Japan's second-largest refiner, shut its 190,000 b/d crude distillation unit in Chiba refinery over April 28 to June 6.

Export volumes may remain firm as Japan's largest refiner, ENEOS, plans to shut its sole CDU at its 145,000 b/d Sendai refinery for scheduled maintenance over early June to mid-July. Furthermore, overall demand for naphtha as a petrochemical feedstock was firm, as not only are olefin margins positive, but also new steam cracker units are slated to come online as of mid-June, market sources said.

The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo was last assessed at $330.125/mt on June 8's Asian close, and has remained over the typical breakeven for integrated producers of $250/mt since May 12, 2021, Platts data showed.

In South Korea, the new LG Chem cracker is slated to start up on June 14-15 and will have an ethylene production capacity of 800,000 mt/year; GS Caltex's new mixed feed cracker is slated to start June 20, with a capacity of 700,000 mt/year of ethylene, Platts earlier reported.

Both LG Chem's and GS Caltex's new crackers will take time to ramp up to 100% operating rates. Also, it is unclear if both crackers would use naphtha as its only feedstock: LG Chem's new cracker can switch up to 40% of its feedstock requirements to LPG, while GS Caltex's can switch up to 30% of its feedstock to LPG.

Inventories of middle distillates such as jet fuel and diesel dropped to 3.484 million barrels as of June 7, down 8.8% from a week earlier, while heavy distillates such as fuels used in power generation and for marine bunkers retreating 5.3% to 13.873 million barrels. Market sources attributed increased buying from Saudi Arabia, linked to operational issues at the Ras Tanura refinery, which produces gasoline, gasoil, kerosene/jet fuel and fuel oil, according to the Platts analysis.