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Vietnam steps up spot gasoline buying on strong demand recovery

Singapore — Vietnam has turned toward the regional spot market to fill its appetite for gasoline as the country's refinery output fails to keep up with a sharp domestic demand recovery, industry sources told S&P Global Platts June 18.

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Since mid-May, at least three separate Vietnamese companies – Petrolimex, PV Oil, and Saigon Petro – were noted to have emerged in the spot market to seek at least 2.972 million barrels of gasoline for loading dates stretching late-May to mid-August, according to open tenders seen by Platts.

The most recent was Saigon Petro, which was seeking 195,500 barrels of 95 RON gasoline for delivery to Cat Lai Terminal in August. Saigon Petro's tender closes on June 26, Platts reported earlier.

Vietnam's increased gasoline import appetite could be attributed to both demand- and supply-side factors.

On the former, demand for gasoline has recovered strongly since the country eased restrictions in April, with driving activity returning to precoronavirus levels.

According to mobility data from technology firm Apple, driving activity is just 5% under baseline levels, akin to levels recorded in February, before the country underwent an extensive lockdown period to curb domestic coronavirus transmissions.

But while driving activity has reached near pre-COVID-19 levels, Vietnamese refineries have yet to raise output by the same extent.

"Nghi Son and Dung Quat [refineries] had cut their rates back in April. But with any refinery, the run rate increase can only be gradual," one Singapore based source said.

Both Nghi Son refinery and Dung Quat refineries were heard to be operating at levels just slightly above 100%, but the exact run rates could not be confirmed with the refineries themselves.

Moreover, both the country's refineries are set to undergo a period of maintenance works.

The 200,000 b/d Nghi Son Refinery is currently undergoing works at one of the plant's two residue hydrodesulphurization units, with the unit set to return online sometime in July. The 148,000 b/d Dung Quat refinery is set to undergo full maintenance works in August, after postponing the start date twice, Platts reported earlier.

Jet, gasoil imports up

The uptick in gasoline demand has also been matched on the middle distillates front, with the country's appetite for jet fuel and diesel, in particular, also improving.

Asian middle distillate sources have said that firm regional demand for gasoil from Vietnam and other Asian countries has underpinned the strength seen in the Asian gasoil market in recent weeks, which has come even as supply constraints have tightened balances.

"Regional [gasoil] exports are down and Vietnam's demand for gasoil is strong," a Singapore-based gasoil trader said, adding that "gasoil supplies are not increasing but overall demand is getting more and more."

This was borne out with Vietnam's latest customs data showing that May gasoil imports sped to the highest level in seven months, as the country's requirement returned following the easing of coronavirus-related restrictions since April 23, Platts reported June 17.

Gasoil imports were registered at 342,921 mt in the second half of May, bringing total gasoil imports for the month at 568,609 mt, customs data showed. This marked a 42.12% jump from April. Market sources said the rise in Vietnam's gasoil imports may also be due to the replenishing of stocks after inflows of the middle distillate were halted earlier in the year due to high domestic stockpiles, coupled with severely battered demand brought about by the coronavirus pandemic.

Over on the codistillate jet fuel, Vietnam's customs data also showed a rise in jet fuel imports for May, with inflows rising 49.28% on the month at 49,190 mt. The slight improvement in demand was likely due to the country's aviation sector readying for a ramp-up in flights, given its plan to resume all domestic flights in June.

Jet fuel imports for May still hovered at below-average levels – historical data from Vietnam customs showed that imports of the aviation fuel averaged 170,897 mt/month in 2019. However, industry sources said inflows into Vietnam will likely continue to increase in the coming months, underpinned by a gradual recovery in the air travel sector.

Vietnam relies on imports to meet most of its jet fuel requirements as its domestic refineries focus on production of other transport fuels.