Analysis: Indonesia’s gasoline output ambition set to drive Australian condensate price recovery
Indonesia’s latest push to improve its self-sufficiency in auto fuels could help propel a recovery in Australian ultra-light crude differentials, with the Southeast Asian nation requiring ample supply of Oceania condensate to raise its gasoline output in an ongoing effort to trim its oil products import bill.
Indonesia saw its purchasing power for refined oil products severely circumscribed by a sharp depreciation in the local rupiah currency during the second half of 2018.
Accordingly, Jakarta has been battling against the country’s lofty current account deficit, encouraging state-run Pertamina to lower its auto fuel import bill and increase dependency on domestic oil.
Reflecting Jakarta’s continued drive to trim its import of oil products, Pertamina will be reducing its import of gasoline by ramping up domestic production, market and industry sources said.
Trans-Pacific Petrochemical Indotama located in Tuban, for whom Pertamina procures condensate cargoes, plans to run at full gasoline mode from August, according to several market sources with close knowledge of the matter.
“Pertamina is buying less gasoline. Not surprising since their refineries are producing more gasoline for domestic consumption,” a gasoline trader based in Singapore said.
TPPI’s drastic shift in its refined oil products slate aimed at boosting domestic gasoline production comes as a much-needed shot in the arm for Australian ultra-light crude suppliers, with Pertamina actively picking up gasoline blendstock from the Oceania producer.
In its last awarded tender that closed last week, Pertamina was heard to have bought two NWS condensate cargoes for delivery in September at a discount of around $3.50/b to Platts Dated Brent, FOB.
One of the cargoes was heard to be an end-August loading, originally held by BHP, while the second was likely to be Mitsui’s from the September program, though this could not be confirmed.
This was in addition to another NWS condensate purchase made by the company in an earlier tender, where the company was heard to have bought a mid-September delivery cargo at a similar discount of around $3.50/b to Platts Dated Brent, FOB.
Trade sources said this was likely Shell’s September equity cargo for loading over September 5-9, though this too could not be confirmed.
In comparison, August-loading NWS condensate cargoes were heard to have traded last month at discounts of around $5-$5.50/b to Platts Dated Brent, FOB.
Pertamina has emerged again with a fresh tender closing next week seeking an October-delivery condensate cargo. This means the company will likely sweep up all three NWS condensate cargoes from the September-loading program this month.
The remaining NWS condensate cargo from the September program, originally held by Woodside for loading over September 28-October 2, is now heard to be in the hands of a trader and will likely be sold into the tender.
“Pertamina’s purchases is probably the most bullish thing in the market right now, not cracks and not demand from other end-users,” one condensate trader said.
BULLISH GASOLINE MARKET
While Pertamina’s reduced gasoline imports is not expected to bode well for the gasoline market — the company plans to import around 8 million barrels of gasoline for August, down from 8 million-9 million barrels for July — gasoline traders nonetheless noted that near-term sentiment remained supported by prompt buying interest from the Philippines, Japan and Vietnam.
A string of refinery issues on the US Gulf and Atlantic Coast have also helped to prop up sentiment further.
“Once the support from the US fades and we move into the winter-grade specifications, eyes will be back on Chinese supply,” a second gasoline trader said.