Asia’s gasoline market will face increased volatility amid confluence of factors
This blog explores the impact of trade flow shifts amid refinery outages across regions, and the uncertainty over US tariffs, on the volatile Singapore 92R gasoline market structure
The gasoline market structure in Asia experienced significant swings in H2 January. The front-month Singapore 92R gasoline timespread flipped to contango on January 21, before it returned to backwardation on January 27 and widened on January 31 (Argus Media). We expect Asia’s gasoline situation to face heightened volatility in February and March, with the front end of the curve potentially widening amid a confluence of factors.
First, downtime in several refineries – planned and unplanned – in major gasoline-exporting countries in Asia will reduce production. Industry news wires including Argus Media reported refining maintenance activities including CDU and/or FCC units amid others at one of Reliance’s Jamnagar plants, as well as at GS Caltex Yeosu, RAPID Pengerang and ENEOS Chiba refineries. Cumulative exports of gasoline/blending components from South Korea, India, Malaysia and Japan dipped slightly m-o-m in January, and exports are expected to continue to fall this month and the next.
Lower imports into Asia expected in February and March
Asia’s gasoline balances will tighten this month and the next amid lower supplies and higher seasonal demand towards Ramadan season which begins in end February. The situation will be exacerbated by lower inflows of gasoline from other regions. Gasoline arrivals from the Middle East to Asia is expected to decrease in February. The 400kbd Jizan refinery is undergoing planned maintenance from January through end February. This has reduced gasoline barrels available for export in January, which should continue in February. As such, Southeast Asia will see lower gasoline inflows this month and H1 March.
Gasoline imports into West Africa have fallen since the commissioning and ramp up of Nigeria’s 650kbd Dangote refinery. That said, recent reports of an unplanned outage in the Dangote refinery’s RFCC unit due to a leak could result in higher gasoline imports into the region, potentially diverting some barrels from the Middle East to West Africa instead of Asia.
Considering all the above factors, we expect increased volatility in Asia’s gasoline situation in February and March. The front-month backwardation in Singapore 92R gasoline could widen to incentivise stock draws in Asia due to lower production and potentially reduced inflows into the region. Further upside to the timespread is possible if gasoline supplies get tightened as a result of run cuts or unplanned outages. While the front end of the price curve narrowed slightly on February 4 as sentiments eased on news of the 30-day pause in tariffs on Canadian and Mexican imports, any resumption in tariffs could widen the backwardation.
