Asian gasoil prices may rise on lower Oct South Korea exports amid refinery run rate cuts

Asian gasoil prices could rise toward the end of October, as South Korean exports are expected to decline due to refinery run rate cuts and a possible rise in prompt demand, market participants indicated.

S-Oil, SK Energy, GS Caltex and Hyundai Oilbank were heard cutting overall refinery run rates by 70,000 b/d, 100,000 b/d, 20,000-40,000 b/d and 70,000 b/d, respectively, according to multiple industry sources.

“South Korea will have less gasoil for export in October due to turnarounds, but these exports could increase in November,” a source following the matter closely said.

Some market participants added that South Korean gasoil exports could fall due to higher domestic demand as market participants continue to anticipate an extension to existing fuel tax cuts.

The South Korean government had previously extended an existing tax cut of 30% on diesel to the end of October, but has yet to make an announcement on a follow-up extension, local media reported.

“There is still no word yet on renewal of domestic fuel tax cuts; if this is not renewed, prompt demand for gasoil in South Korea could rise,” a trader said.

Reflecting a drop in South Korean gasoil exports, S&P Global Commodity Insights earlier reported that four gasoil cargoes were offered by GS Caltex for October loading, which were lower than the average of 6-8 cargoes a month, according to market participants with knowledge of the matter.

South Korea’s GS Caltex offered two 500 ppm cargoes of 300,000 barrels each and two 10 ppm cargoes of 300,000 barrels each, of which only two 10 ppm cargoes of 300,000 barrels each were sold at a premium of around $1/b to the October average of Mean of Platts Singapore 10 ppm sulfur gasoil assessments, FOB, for Oct. 1-5 and Oct. 13-17 loading, Commodity Insights reported earlier.

Reflecting a strengthening in the Asian gasoil complex, the Platts-assessed FOB Singapore gasoil 0.001% (10 ppm) cargo was assessed at 60 cents/b to the Mean of Platts Singapore gasoil assessment Oct. 21, down 11 cents/b on the day, but up 7 cents/b on the week from 53 cents/b at the Asian close Oct. 14, Commodity Insights data showed.

The lower refinery run rates are also expected to reduce co-distillate jet fuel exports, sources said.

South Korean exports were heard to have been limited, with few export cargoes available for November, sources said.

“[South Korean refineries] probably cut run rates due to weaker margins in Q3,” a regional middle distillate trader said, adding that the run rates were estimated to be cut by approximately 10%.

Refinery run rates were estimated to be 90% in Q4, the same source said.

The Asian jet fuel complex strengthened as the Platts-assessed FOB Singapore jet fuel/kerosene cargo averaged 16 cents/b to the Mean of Platts Singapore in the week to Oct. 18, up 33 cents/b from the previous week, Commodity Insights data showed.
Source:Platts