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Vietnam's Nghi-Son Refinery offers rare spot motor fuel cargoes as domestic supply builds

Highlights

Vietnamese refiners keeping run rates high

Domestic demand seen set to increase in Q4

Asian gasoline, gasoil markets turning more bearish

Singapore — Vietnam's Nghi-Son refinery in a rare move has emerged in the Asian spot market to offer cargoes of motor fuel as domestic inventories build steadily amid high refinery run rates, adding to supply pressure in weak regional gasoline and gasoil markets.

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The 200,000 b/d refinery on Oct. 19 offered 40,000 kiloliters of 95 RON gasoline for loading over Nov. 15-30 from the refinery's port in Thanh Hoa province.

It was was also reported to have offered a total of 80,000 kl of either 50 ppm or 100 ppm gasoil in two equal-sized cargoes for loading over Nov. 1-10 and Nov. 11-20 respectively.

The company's spot offerings come as both of Vietnam's refineries ramp up operating rates following a period of maintenance.

Vietnam is traditionally a net importer of motor fuel and the country is one of the biggest buyers of gasoline in Southeast Asia. This week's unusual gasoline export offer is an indication of high stockpiles in the country, according to fuel marketing managers at Saigon Petro.

Nghi Son in September kept run rates above 100% to make up for the loss of output from state-run PetroVietnam's 130,000 b/d Binh Son Refining and Petrochemical refinery in Dung Quat, which shut for turnaround in mid-August, S&P Global Platts reported earlier.

However, run rates remain high despite Dung Quat having restarted at end September.

"The [Nghi Son] refinery is still running very hard. There are more than enough inventories," one Vietnam based source said. "Dung Quat should also be running at a very high run rate; their normal is usually above 100% too," the source added.

Industry sources said the high run rates were likely due to expectations of stronger domestic demand in the fourth quarter.

"Most of the [COVID-19 movement] restrictions have eased. With international travel still poor, there are expectations that more domestic travel will occur," one Singapore-based source said.

Agreeing, another Vietnamese source said: "Demand now is more or less stable, but the plants are raising run rates back past 100% already."

Reflecting the steady demand, driving activity across Vietnam was 24% above baseline levels Oct. 17, where it has plateaued since mid-September, mobility data from Apple showed.

MARKET IMPACT

The addition of Vietnamese barrels to the Asian spot market came as a surprise to participants already grappling with floundering fundamentals, with the market for high-octane gasoline in particular under pressure from poor Malaysian demand.

"Traders are watching closely for news if the Malaysian restrictions will be extended. This will deal another blow to 95 RON [gasoline]," one trader said.

The FOB Singapore 95/92 RON gasoline inter-octane spread was assessed at a six-month low of 64 cents/b at the 0830 GMT close of Asian trade Oct. 19 before edging back up to 72 cents/b at the Oct. 20 close, Platts data showed.

Gasoil traders said the spot gasoil sell tender from Nghi Son refinery was also likely due to high inventories, with the refiner attempting to reduce its surplus by offering cargoes for export.

"Local gasoil inventories are still high in Vietnam and demand is trying to catch up, plus Dung Quat refinery is back from turnaround this month," a Singapore-based gasoil trader said.

Another industry source said: "There's been no change in diesel oil consumption in Vietnam since early September... it's still been quite weak for two reasons: industrial manufacturing activities have been decreased by COVID-19 and heavy rains have caused even weaker demand for diesel oil, especially for power generation."

Market participants said Vietnam's surplus gasoil barrels would add to an already well-supplied region, which has faced an extended period of low demand.

The Singapore 10 ppm sulfur gasoil physical crack against front-month cash Dubai crude -- a measure of the products's relative strength to the crude – slipped to a more than three-week low of $2.72/b at the Asian close Oct. 20, down 55 cents/b day on day.

The cash differential for 10 ppm sulfur gasoil cargoes for loading from Singapore were rangebound, edging up 3 cents/b to minus 52 cents/b to Mean of Platts Singapore gasoil assessments at the 0830 GMT Asian close Oct. 20.