Tokyo — Japan's largest refiner, ENEOS, is importing a rare gasoline cargo from the UAE's Emirates National Oil Company, sources say, underlining a trend among Japanese refiners to rely more on product imports to meet demand while keeping domestic run rates low.
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ENOC sold a gasoline cargo on the tanker Chang Hang Guang Rong to ENEOS on a CFR basis, two sources with direct knowledge of the matter told S&P Global Platts August 4.
ENEOS is scheduled to receive the tanker at Negishi in Yokohama, Tokyo Bay on August 7, according to data intelligence company Kpler. ENEOS owns the 270,000 b/d Negishi refinery. The Chang Hang Guang Rong is carrying a 317,044-barrel cargo of gasoline and naphtha loaded from ENOC's refinery in Jebel Ali.
ENEOS' spokeswoman declined to comment on gasoline imports from the UAE. An ENOC spokesperson was not immediately available for comment.
"There is supply in Asia but it might not be what they [ENEOS] were looking for. The specification for Japanese cargoes is quite tight, and refiners in South Korea and China might have had already fully booked their cargoes," a Singapore-based market source said.
"Given that this was a co-loaded cargo at a time when freight was cheap, it would have not been too expensive to bring MOGAS from the Middle East." Medium Range tanker freight was at multi-year lows when this ship was chartered. This would have reduced the delivered cost of the cargo.
ENEOS' latest gasoline imports came to light while there is a certain amount of recovery in domestic gasoline demand following the lifting of the state of emergency on May 25 at the same time as the company is keeping its refinery runs relatively low.
It had delayed the restart of its 170,000 b/d No. 2 crude distillation unit at the 235,000 b/d Kawasaki refinery in Tokyo Bay from late June to July 31, as well as delaying the restart of the No. 3 65,000 b/d Kawasaki crude distillation unit to the first 10 days of August from late June.
At its peak refinery outage by mid-July, 516,000 b/d, or 26.7% of its installed capacity of 1.93 million b/d in Japan was offline for scheduled and unscheduled shutdowns.
Japan was a net importer of gasoline for the third consecutive month in June due to low refinery run rates combined with the month-on-month recovery in domestic motor fuel sales.
Japan imported an average of 76,508 b/d of gasoline in June, more than double the 36,607 b/d a year earlier and up 44.1% from May, while it exported of 11,286 b/d of gasoline, according to the Ministry of Economy, Trade and Industry data.
The increased imports came as domestic gasoline sales surged 24.4% month on month to 782,213 b/d in June, while Japanese crude throughput was little changed on the month but plunged 28% year on year to 2.08 million b/d.
The purchase of the Middle Eastern cargo by ENEOS comes at a time when bearish fundamentals have forced regional refiners to trim run rates and output.
Refining margins for gasoline in particular, slumped again at the end of July due to expectations of a large influx of cargoes from Chinese state-owned refiners which raised exports to reduce large domestic stockpiles of motor fuel, market sources said.
On the demand side, a fresh wave of coronavirus outbreaks in Asia have also threatened to derail regional demand recovery, especially with new lockdown measures being put in place by countries such as the Philippines and India.
The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude, which measures the relative value of benchmark 92 RON gasoline against crude, even fell to minus 79 cents/b at the close of Asian trading August 3, the first time since June 2 the spread was assessed in negative territory, Platts data showed. It has since recovered to plus 19 cents/b on August 4.