Fujairah: Driving towards the goal of being a global energy hub

The Asian middle distillates complex is expected to remain volatile during May 4-6, with market participants keenly watching for developments on the possibility of an embargo on Russian oil in the EU, which could lead to importing countries in the EU increasing their reliance on Asian barrels. At 11 am Singapore time (0300 GMT), the front-month July ICE Brent crude oil futures contract was at $105.78/b, up 81 cents/b (0.77%) from the May 3 settlement. Jet fuel/Kerosene ** Activity in the Asian jet fuel/kerosene complex is expected to remain steady to slightly lower later in the week amid ongoing regional holidays, which will see many market participants away from desks. ** While some supply concerns remain -- due to large outflows from China and soaring freight rates which have worsened arbitrage economics and trapped more barrels of jet fuel within the region -- sources said a level of support has been placed under the Asian jet fuel/kerosene market. It has seen a steady increase in demand as more countries reopen borders and with airlines scheduling more flights to meet air travel demand. ** Brokers pegged the balance-month May-June jet fuel/kerosene time spread at plus $5.35/b at 0300 GMT May 4, up 85 cents/b from plus $4.50/b at the Asian close April 29, S&P Global Commodity Insights data showed. ** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus $1.43/b to Mean of Platts Singapore jet fuel/kerosene assessments at the April 29 close, up 15 cents/b, or 11.72%, from the start of the week on April 25, S&P Global data showed. ** Japan's jet fuel stocks rose 4.5% week on week to 4.88 million barrels over April 17-23, according to latest Petroleum Association of Japan data released April 27. The increase comes on the back of a hike in jet fuel output, which rose 10% on the week to 1.19 million barrels for the week ended April 23. The data also showed that Japan's jet fuel outflows were up 7.6% on the week to 543,815 barrels for the week ended April 23. ** The Q3-Q4 jet fuel/kerosene swap spread averaged plus $7.89/b over April 25-29, up from plus $6.91/b the week before. Gasoil ** Increasingly viable arbitrage economics, amid growing expectations of the EU sanctioning Russian oil product exports, are providing an additional measure of support to an already tight Asian gasoil complex. Robust gasoil cracks continue to incentivize refineries to maximize their yield of gasoil, and export any excess barrels. ** Brokers pegged balance-month May-June Singapore gasoil at plus $8.40/b at 0300 GMT May 4, ticking lower by 19 cents/b from plus $8.59/b at the Asian close April 29. ** The May EFS spread was pegged at minus $71.62/mt at 0300 GMT May 4, widening $7.10/mt from minus $64.52/mt at the April 29 close. ** Singapore's onshore commercial middle distillate stocks fell 21.94% week on week to 7.04 million over April 21-27, snapping two straight weeks of increase, Enterprise Singapore data released late April 28 showed. Total inflows of gasoil into Singapore were recorded at 213,024 mt in the week to April 27, outpaced by total outflows of 260,622 mt. ** The Q3-Q4 gasoil swap spread averaged plus $8.98/b over April 25-29, up from plus $7.46/b the week before.

Marathon Petroleum, the largest US refiner, is ramping up rates at its refineries, with expectations of reaching 95% capacity in the second quarter to meet the rising demand for both diesel and gasoline as the summer driving season looms. The company is deferring some planned work to capture the strong current spot market environment, "backloading" the company's 2022 turnaround work, according to Ray Brooks, Marathon's head of refining, on the May 3 results call. "With current demands, we are really seeking to maximize our refining system as indicated by the second-quarter guidance," Brooks said, adding, "what this really means...is that we've looked at some fixed bed catalyst changes that we had planned for [Q2]. We've determined we have a little bit as far as catalyst activity. So we've deferred that out later in the year. "We're working right now to maximize distillate production across our system. Just to give you a little more color on that, that's something that we look at daily, make sure that we're maximizing the total recoverable distillate, the endpoint, and maximizing the front end of the distillate," he said. Increased ULSD exports tighten the USAC market Marathon, like its peers, has been running in maximum distillate mode to take advantage of global rising diesel cracks from tight supplies and backwardation in distillate markets. The company's total exports averaged 200,000 b/d at the end of Q1 and have moved up to an average of 250,000 b/d and 300,000 b/d so far in Q2, with barrels moving primarily into Latin America, but with some barrels moving to Europe. Brian Partee, Marathon's head of clean products, said that increased distillate exports have tightened the US Atlantic Coast market, which is seeing lower European imports as well as lower flows up the Colonial Pipeline, the main conduit of refined products from the USGC refiners to New York Harbor. But this is a function of timing, and the "run-up in the prompt front end of the cycle," he said, allowing Marathon to capture current high diesel prices immediately through export rather than waiting for the time it takes diesel to move up the Colonial Pipeline. However, that dynamic is beginning to ease as the spread between the price of US Atlantic Coast ULSD and USGC export diesel is widening, drawing imports into the USAC. Platts assessments showed USAC ULSD diesel barges held a 91.4 cent/gal premium of USGC ULSD export price May 2, compared with the 33 cent/gal premium so far in 2022. "I think you're reading the tea leaves right as you look forward and think about less Russian exports and European complex starting to find a way to rebalance the New York Harbor market," he told an analyst on the call, adding the Colonial Pipeline is a "forward opportunity, more structural and longer term," he said. Unusual times Restrictions on Russian petroleum exports following its incursion into Ukraine in February have had a particular impact on the global diesel supply. Russian middle distillate exports, which averaged 1.1 million b/d in February, fell to 943,000 b/d in March and 868,000 b/d in April, Kpler data showed. The extreme volatility with distillate cracks and the backwardation of distillate markets is creating an unusual situation in oil markets at a time when refiners historically switch to maximum gasoline mode to build up inventories, which are lagging the five-year average. Total US gasoline inventories stood at 230.8 million barrels for the week ended April 29, according to the most recent Energy Information Administration data. However, like its peers, Marathon is constantly looking at the economics of making diesel versus making gasoline as it prepares for the summer driving season looming at the end of May with the Memorial Day weekend, while looking to take advantage of the backwardation in the diesel market. "Our plan right now is to run really, really full, and run really, really hard during gasoline season this year," Brooks said.

US refiners are taking their plea to the public with a new ad campaign launched by Fueling American Jobs Coalition asking President Biden to lower gasoline prices by fixing the Environmental Protection Agency's Renewable Fuel Standard, which mandates volumes of renewable fuel blending required by refiners. "This new ad campaign comes as experts warn that the broken RFS is adding up to 30 cents/gal at the pump, and as Russia's war in Ukraine and record inflation push gas prices to near-record levels nationwide," the group said in an April 22 statement. US gasoline prices are soaring just ahead of the summer driving season as a result of low inventories, the return of demand post-pandemic and more expensive crude oil, with some gasoline prices touching levels not seen since 2008, when crude prices hit $145/b. US Gulf Coast cracking margins for WTI MEH are extremely high, averaging $35.76 so far in Q2 2022, up from the $20.84/b in Q1 2022, margin data from S&P Global Commodity Insights showed. Stripping out the cost of RINs – the credits issued by the RFS and bought by refiners who are unable to blend enough renewables into their fuel to meet their renewable volume obligations – these margins drop by about $4/b to average $30.89/b in Q2 and $16.33/b in Q1 illustrating the impact of the RFS on refining margins and the cost of fuel. Fueling American Jobs Coalition advocates an overhaul of the RFS to lower gasoline prices. Its campaign comes on the heels of President Biden's April 12 waiver to increase the use of renewable fuels by raising the blending volumes of less expensive ethanol into summer grade gasoline to 15% from 10%. In a world of tight supply, increasing ethanol blending to 15% will indeed add supply and help lower gasoline prices for E15 consumers by about 3%-7%, according Renewable Fuels Association's president Geoff Cooper. But the overall impact will be blunted by limited access by most US drivers to the higher ethanol fuel. "It's becoming widely available – slowly – but at last check some 2,500 gas stations in the US offered it, mainly in the corn belt areas and the Midwest," said Patrick De Haan, analyst with Gasbuddy.com, which tracks gasoline demand and usage at 140,000 stations throughout the US and Canada. Market tightness to continue There is contentious and litigious history between the renewable fuel lobby and the refiners, spanning back to 2005 and the inception of the RFS as part of the Energy Policy Act of 2005. That law sought to protect US energy security from foreign oil risk by incentivizing renewables. This was prior to the shale revolution, increased crude production and the US becoming a major exporter. John Auers, executive vice president at Dallas-based consulting firm, Turner Mason, said Biden's recent decision to allow E15 use is not expected to add a lot more ethanol into the gasoline pool. ""It's a political win. But not a giant one. And not super impactful on the market itself," he said. "There is not going to be a lot more ethanol that actually moves into the pool." According to Renewable Fuel Association estimates, 814 million gallons of E15 was sold in the US in 2021 with an ethanol content of 122 million gallons. The E15 summer waiver will only add about 30 million gallons of ethanol to the pool. Globally, tight gasoline and diesel supply stems from a spate of refinery closures, as the drop in demand due to coronavirus lockdowns culled less efficient plants. "It's a big deal. We've lost 3.5 million b/d of refining capacity globally. And that's made everything tight," Auers said. US gasoline supplies are holding just below the five-year average at 232.4 million barrels for the week ended April 15, the most recent US Energy Information Administration data showed. But supply in the central US Atlantic Coast is extremely low, well-below the five-year average at 26.95 million barrels for the week ended April 15, EIA data shows, amid a slowdown in imports from Europe. Refinery closures continue Even with the rebound in demand, high refinery margins and low fuel supply, refiners are still closing their doors, with many citing the high cost of complying with the RFS as a reason for shutting their doors. The latest announced closure was from LyondellBasell. In its April 21 statement, the company said was getting out of the refining business by shutting its 263,776 b/d Houston refinery after it was unable to find a buyer. In earlier statements made in September 2021, the company cited the high cost of complying with US RFS as a reason it was looking to sell the plant. "More independent refinery closures would cause catastrophic job losses, even higher gas prices and increase our nation's reliance on foreign fuel at a time when few can afford it," the Fueling American Jobs Coalition said. They are "urging President Biden and his administration to take swift action to lower gas prices, save union jobs, and protect America's energy independence by fixing the RFS once and for all," according to their statement. This is a trend which could continue due to the high cost of the RFS, which could further tighten the market. "It's a tight market now. And then we have to worry about hurricane season," Auers said.

Poland is looking further afield and building ties with Saudi Arabia as it diversifies its sourcing of ultra low sulfur diesel following Russia's invasion of Ukraine and an upsurge in Ukrainian reliance on fuel from Poland, according to market and shipping sources. Polish ULSD imports spiked to a new record of around 701,000 mt in March, according to Kpler shipping data, far outpacing the three-month moving average of around 384,000 mt/month of diesel imports and the March 2021 level of 363,000 mt. In a never-before seen move, long-range tanker Minerva Pisces recently carried around 95,000 mt of Saudi ULSD from Yanbu to Gdansk, while around 35,000 mt arrived from BP's Rotterdam refinery in the Netherlands, split over two parcels. It comes as EU member Poland, a strong supporter of Ukraine, steps up efforts to limit reliance on Russia -- before the war Poland had taken crude from as far afield as Iraqi Kurdistan -- and as Poland's PKN Orlen is in the process of selling Saudi Aramco a stake in the country's Number 2 refinery, Gdansk. In addition, Poland is becoming the main source of fuel for war-torn Ukraine following the destruction of Ukrainian fuel infrastructure, including parts of its largest refinery, Kremenchuk, and as Ukraine has cut imports from northern neighbor Belarus, an ally of Moscow. However, the vast majority of Poland's March imports were still of Russian origin: around 525,000 mt -- almost 75% -- came from Russia's Baltic port of Primorsk, while 46,000 mt originated nearby in Lithuania, where PKN Orlen owns the Orlen Lietuva refinery at Mazeikiai. Normally Poland relies on Russia for up to 100% of its diesel imports, while East of Suez arrivals in Europe rarely get further north than the Amsterdam-Rotterdam-Antwerp hub. The dominance of Russian diesel generally precludes alternatives being shipped from ARA to the Baltic, although steep discounts for Middle East diesel may have been a factor in March, with FOB Arab Gulf 10 ppm ULSD averaging a near $10/b discount to CIF NWE cargoes, according to S&P Global Commodity Insights data. In April, Poland continues to expect arrivals from further afield. By the end of April, around 172,000 mt of Russian diesel is set to have arrived -- around 50% of total imports, according to Kpler data. However, a second long-range tanker, Polaris Bay, already delivered around 88,000 mt of ULSD from Yanbu to Gdansk on April 5. A cargo of around 30,000 mt of ULSD from West Coast India also arrived on the tanker Seasprat, having loaded from a larger vessel via ship-to-ship transfer. A second cargo of around 35,000 mt from BP's Rotterdam refinery also made its way to Poland in early April, Kpler data showed. Ukrainian dependence Poland is almost the sole conduit for meeting Ukraine's fuel needs, including military and agricultural demand, due to lack of supply from Belarus and Russia, and the closure of Black Sea imports from countries such as Azerbaijan as a result of war risk. The geography of the Carpathian Mountains limits shipments from neighbors such as Hungary or Romania. Ukraine's largest refinery, Kremenchuk, was badly damaged in a missile attack on April 2 and put out of action, while the Shebelinka Gas Processing Plant in eastern Ukraine was taken offline on Feb. 26 due to the threat of shelling. In addition, the Odesa and Lysychansk refineries were hit by air strikes in April, though both had been out of action for more than 10 years. Imports via tanker truck are an increasingly important means of supply as Russia's navy has targeted fuel depots across the country, according to Ukrainian analysts and industry sources. In 2021, Ukraine imported 8.79 million mt of petroleum products, up 9.6% from 2020, according to the state customs service.

Latin American traders saw a few more tenders emerge April 20, although in smaller volumes as the market takes more tentative steps with freight and diesel costs declining from record peaks but remaining historically high. Several sources said Vibra, Petrobras' former fuels-distribution unit BR Distribuidora, agreed to buy one ultra low sulfur diesel cargo from BB Energy for May 24-28 delivery into Brazil, while Dominican Republic state-owned oil company Refidomsa was again seeking distillates, this time 220,000 barrels of high sulfur diesel for May 8-10 delivery. Pemex trading arm PMI awarded Novum 180,000 barrels of low sulfur diesel for April 25-30 delivery, they added. ULSD is used more for road transportation, while low sulfur diesel and high sulfur diesel are geared toward power generation needs. Prices were still high enough that several large tenders were heard to have been postponed, or possibly not awarded. Chile's COPEC was said to have delayed a request for three ULSD cargoes, while Petroecuador pushed back to April 26 from April 18 a tender to buy 1.96 million barrels of premium diesel. Raizen, another Brazilian distributor, was heard to have self-filled from its Brazil subsidiary for ULSD and gasoline tenders for its Argentina subsidiary. Brazil import parity costs remain just under the March 8 record of $179.26/b, down $2.16 day on day April 20 to $175.54/b for ULSD IPP at Santos. Other IPP or delivered cargo assessments for jet, gasoline and diesel from Mexico to Argentina have seen similar slight declines but remain highly elevated, especially for ULSD markets. Diesel or gasoil remains the sore spot as the loss of Russian supply in the global market has tipped the marginal barrels toward Europe instead of Latin America and other areas. Latin America also has come off a summer of big distillate demand for power generation because of heat waves, only to need more of the same to meet spring harvest and winter heating demand. "The US sent a lot of product to Latin America for Cammesa and winter demand," one source said. Cammesa is Argentina's wholesale power administrator. He added that a drop from record prices has brought a few more companies out looking to fill immediate needs, especially with clean freight rates much lower and ships freeing up slightly after a flurry of fixtures in early April. The clean lump-sum rate for US Gulf Coast to eastern Mexico for 38,000 mt hit a record $1.85 million on April 8, but dropped $100,000 on the day April 20 to $600,000, a level that was still in the top 10% of rates since Platts assessments began in 2015.The clean freight rate for USGC to Brazil for 38,000 mt ships reached a record w500 on April 6 for three days before backing down April 20 to w250. "Clean has come way off," the first source said. "It's a touch softer, for sure." A second source said people were waiting to see "if the Latin America world wakes up" once freight comes off. The short-distance USGC-Caribbean clean 38,000 mt rate reached a lump sum of $2.05 million on April 12, nearly double the previous record, but has since dropped to $800,000 April 20, in line with typical spikes since the assessment began in 2015. Refidomsa's high sulfur diesel award will avoid that peak rate, as happened with another tender the Dominican Republican entity awarded April 18 to Tartan/Pilot, for two cargoes of 100,000 barrels of ULSD to deliver May 9-11 and May 28-30. The premium Refidomsa paid was heard in the low teens to S&P Global Commodity Insights' Platts US Gulf Coast waterborne ULSD assessment, or about twice as high as the premium on its last ULSD tender. But as a third source said, the diesel market is tight but workable, adding: "Recent awards are going to be much higher premiums."

South Korea is undeterred by surging crude prices and the world's fourth biggest crude importer aims to actively secure ample refinery feedstocks as local refiners maintain relatively high run rates to capture lucrative Asian refining margins, industry and market participants said over April 18-21. South Korea received 11.472 million mt, or 84.09 million barrels, of crude oil in March, up 16.9% from 71.92 million barrels imported a year earlier, latest data from Korea Customs Service showed. The March shipments were also up 6.1% from 79.28 million barrels imported in February, while crude imports during the first three months increased 15.4% year on year to 258.17 million barrels, the customs data showed. The country's crude imports are likely to maintain the upward momentum over the coming months as local refiners actively conduct spot crude purchases on top of their term supply contracts in an effort to maintain high throughput and run rates, with the primary goal of capturing robust regional refining margins and expanding oil product export opportunities. Second-month Singapore gasoil swap crack against Dubai swaps averaged $27.80/b to-date in April, compared with the first-quarter average crack spread of $19/b and the 2021 average of $9.60/b. Global crude supply is tight but oil product supply is even tighter, making an ideal market condition for highly sophisticated South Korean refineries capable of maximizing high-end fuel output and sales, according to middle distillate marketers at major South Korean refiners including S-Oil and SK Innovation. Local refiners and condensate splitters processed 79.85 million barrels, or 2.58 million b/d, of crude in February, up 8.7% from 73.48 million barrels a year earlier, rising for the seventh straight month, latest data from state-run Korea National Oil Corp showed. Refining margins are running high as various financial sanctions against Moscow are limiting Russian oil product trades, while Chinese fuel production and exports are low amid lockdowns in the country's major cities, one refinery official said, indicating that margins for diesel and jet fuel in particular are outperforming due to rapidly improving people mobility across Asia and Oceania. Russian products are scarce and the sharp decline in Chinese middle distillate supply in the regional market is a boon for South Korean transportation fuel exporters, the middle distillate marketers said. China's gasoil, gasoline and jet fuel exports tumbled 52.7% in the first quarter from the same period of 2021, amid a steep reduction in export quota allocations, S&P Global Commodity Insights reported previously, citing latest data from General Administration of Customs. In addition, China's crude throughput fell 1.5% year on year to 13.96 million b/d in the first quarter due to the dual blow of war-led lofty global oil prices as well as lockdowns imposed as a result of fresh outbreaks of COVID-19, S&P Global reported previously. Robust product sales to Australia South Korea's petroleum product sales to Australia are expected to reach a multi-year high in first-half 2022 as the Oceania fuel importer heavily favors South Korean products over Chinese supply as trade and geopolitical tensions between Canberra and Beijing persist, according to refinery sources in Seoul and fuel distribution managers in Sydney and Brisbane. South Korea is estimated to have exported around 13.6 million barrels of oil products to Australia in Q1, up 77% from a year earlier and the highest sales volume in the quarter since 15.7 million barrels were exported during the first three months in 2017, according to marketing information gathered from major South Korean refiners by S&P Global and latest data from KNOC. Australian fuel import and distribution companies have been enquiring for incremental cargoes from South Korean refiners and fuel traders in recent few trading cycles as the sharp reduction in China's fuel export quotas and most importantly the prolonged Canberra-Beijing tensions prompt Australia to heavily favor its close economic and geopolitical ally South Korea, according to the refinery middle distillate marketers. In 2021, South Korea and Australia upgraded their bilateral relationship to a comprehensive strategic partnership. Tensions between Canberra and Beijing have once again escalated in recent weeks, after China signed a security pact with the Solomon Islands in a move that could see China establishing a military base in close proximity to Australia's mainland. Top crude suppliers The customs data showed South Korea's import of US crude in March, mostly light sweet grades, slipped 3% from a year earlier to 10.87 million barrels. However, South Korean refiners combined have been receiving at least five VLCCs of US crude every month since June 2020, with the exception of December 2021. South Korea's crude imports from its top supplier Saudi Arabia, except shipments from the Saudi-Kuwaiti Neutral Zone, jumped 66.2% year on year to 31.02 million barrels in March, the customs data showed. KNOC will release detailed oil trade data for March, including crude imports from Russia, in the week of April 24. South Korea's monthly crude imports (Unit: million barrels) Crude imports Jan-21 76.87 Feb-21 74.97 Mar-21 71.92 Apr-21 83.36 May-21 80.96 Jun-21 80.17 Jul-21 78.03 Aug-21 82.83 Sep-21 78.63 Oct-21 85.13 Nov-21 80.36 Dec-21 86.93 Jan-22 94.79 Feb-22 79.28 Mar-22 84.09 Source: Korea Customs Service, Korea National Oil Corp.

China's gasoil, gasoline and jet fuel exports fell 52.7% in the first quarter from the same period of 2021, amid a steep reduction in export quota allocations, data released April 18 by the General Administration of Customs showed. Combined exports of the three key oil products amounted to 6.12 million mt, accounting for 47% of the total quotas allocated in the first batch for 2022, leaving 6.88 million mt available. Beijing is set to cut the country's oil product exports by slashing gasoline, gasoil and jet export allocations in the first batch of quotas for 2022 by 56% year on year to 13 million mt. The remaining quotas are likely to only sustain for a quarter if the outflows are stable from current levels, analysts said. "We haven't heard that there will be a second batch of export quota allocation yet," a source with Norinco's Huajin refinery said. The refinery in Q1 has used up its quotas of 150,000 mt that were allocated in the first batch. Meanwhile, refinery sources from PetroChina and Sinopec revealed that they have limited quotas left and have still been waiting for further notice on quota allocations for the next round. A senior economist with Sinopec called for increasing quota allocation to offset stock pressure on refineries as domestic demand falls, with Beijing's zero-tolerance approach to controlling the coronavirus slowing economic activities and mobility. S&P Global Commodity Insights' Platts Analytics expects China to witness oil demand destruction of over 1 million b/d in both March and April, and nearly 600,000 b/d in May from its original forecast due to the movement curbs. In the report dated March 16, it reduced the demand forecast by 650,000 b/d for March and 400,000 b/d for April. "The main loss was attributed to gasoline and jet fuel due to the travel suspension," Platts Analytics said in the report. Due to limited quota availability, exports in Q2 are more or less stable from Q1, forcing refineries to cut throughput amid high feedstock costs. Product breakdown In March, the country's gasoil exports jumped 239.8% to a six-month high of 670,000 mt in March from a multi-year low of 197,000 mt in February, reflecting weak demand in the domestic market. With export margins becoming more attractive in March, China's oil companies have adjusted their export plans from around 500,000 mt initially, and sent more gasoil cargoes abroad, according to refinery sources. However, overall gasoil exports in the first quarter remained 82.7% lower at 1.08 million mt compared to 6.2 million mt a year ago, GAC data showed. Meanwhile, gasoline exports rebounded to a nine-month high of 1.16 million mt in March, which was more than double the initial estimation of about 550,000 mt, the data showed. Demand for gasoline has been mostly hit by movement controls and high product prices, a refinery source said, adding that stocks of gasoline were the highest among all oil products. Market sources estimate China's gasoline exports in April to be at 1 million-1.1 million mt. But due to quota shortage, gasoline exports of 3.05 million mt in Q1 remained 40.2% below the level in the same month in 2021. Jet fuel was the only product to witness a year-on-year increase in exports amid muted domestic consumption because of COVID-19-related controls and resurgent demand for international flights overseas. Outflows in March rose 7.2% year on year to 770,000 mt in March, and jumped 25.2% to 1.99 million mt in Q1, according to GAC data. China's key oil products exports ('000 mt) Mar-22 Mar-21* % Change Feb-22 % Change Gasoline 1,160 1,557 -25.5% 1,024 13.3% Gasoil 670 2,797 -76.0% 197 239.8% Jet 770 718 7.2% 671 14.8% Total 2,600 5,072 -48.7% 1,892 37.4% Q1 2022 Q1 2021* Change Gasoline 3,050 5,097 -40.2% Gasoil 1,080 6,245 -82.7% Jet 1,990 1,590 25.2% Total 6,120 12,932 -52.7% Source: General Administration of Customs Notes: * was adjusted according to the % change provided by the GAC

The Asian middle distillates complex continued to diverge in the week of April 18-22 as jet fuel/kerosene may be weighed down by the prospect of rising supplies from China, while robust demand for gasoil amid still tight availability is likely to support gasoil values. At 11:00 am Singapore time (0300 GMT), front-month June ICE Brent crude oil futures contract was at $112.40/b, up $3.79 (3.49%) from the April 14 Asian close of $108.61/b. Jet Fuel/Kerosene ** Jet fuel/kerosene complex continued to lose ground as looming concerns of higher Chinese exports overshadowed emerging demand. Regional demand outlook has been improving as borders reopen, but anticipated supply may overwhelm still fresh demand that is just beginning to pick up. ** Brokers pegged front-month May-June jet fuel/kerosene time spread at plus $6.20/b at 0300 GMT April 18, up $1.32/b from plus $4.88/b at the Asian close April 14, S&P Global Commodity Insights data showed. ** FOB Singapore jet fuel/kerosene cash differential was assessed at plus $1.62/b to Mean of Platts Singapore jet fuel/kerosene assessments at the April 14 close, down 58 cents/b, or 26.36%, from the start of the week, S&P Global data showed. ** The prolonged coronavirus-induced lockdowns and social distancing measures in China has meant that the country's aviation sector and jet fuel demand has been severely affected. With surplus volumes building, market participants estimated that China's April jet fuel exports could hit as high as 1 million mt in April, versus earlier estimates of 600,000-700,000 mt. ** Q3-Q4 jet fuel/kerosene swap spread averaged plus $4.53/b over April 11-14, down from plus $4.92/b the week before. Gasoil ** The Asian ultra-low-sulfur diesel market will continue to see support from robust demand and tight supply, which have been widening product cracks to near record highs over the past week. However, medium-high sulfur gasoil grades are not expected to match the strength seen in the low sulfur gasoil market, as demand for those products remains relatively limited. ** East-West arbitrage economics for gasoil are expected to remain unviable in the coming week, though it remains highly contingent on the rapidly evolving Russia-Ukraine conflict. Thin arbitrage flows to the West could allow more barrels to remain stuck within the Asia-Pacific region, providing a measure of relief to the Asian gasoil complex. ** Brokers pegged front-month May-June Singapore gasoil at plus $9.75/b at 0300 GMT April 18, ticking down 2 cents/b from plus $9.77/b at the Asian close April 14. ** May EFS spread was pegged at minus $41.20/mt at 0300 GMT April 18, widening $14.20/mt from minus $27/mt at the April 14 close. ** Middle distillate inventories at UAE's port of Fujairah plummeted 36.9% week on week as of April 11 to 1.18 million barrels, defying an overall trend of increasing oil product stockpiles in the Middle Eastern trading hub over the same period, according to latest data from Fujairah Oil Industry Zone, reflecting tight supply balances in Asia. ** The Q3-Q4 gasoil swap spread averaged plus $4.98/b over April 11-14, narrowing from plus $5.15/b the week before.

Japan will start on April 16 releasing 6 million barrels of oil from privately-held petroleum reserves as part of its 15 million barrels release in its joint effort with the International Energy Agency, the Ministry of Economy, Trade and Industry said April 15. Japan's 6 million barrels of oil release will be made by allowing local refiners and oil products importers to lower their stockpiles in the privately-held reserves by three days over April 16-Oct. 8, METI said in a statement. The move follows Japan's April 7 announcement to release a total of 15 million barrels, including from the national oil reserves for the IEA's largest ever stock release of 120 million barrels. Although Japan has not disclosed how it will release the remaining 9 million barrels of oil from the national petroleum reserves, it will be the first such release under the country's petroleum stockpiling law since the reserves were established in 1978. Together with its earlier release of 7.5 million barrels crude and oil products from privately-held petroleum reserves, or four days of the stockpile requirements, Japan will lower the requirements by a total of 13.5 million barrels or seven days. Japan extended April 8 its previous release of 7.5 million barrels of crude and oil products from privately-held petroleum reserves by six months to Oct. 8 in response to a recent request from the IEA amid the prolonged Ukraine war, according to a METI source. The latest IEA move comes after the US pledged in the week ended April 2 to tap 180 million barrels of oil, effectively releasing 1 million b/d for six months from May, in a bid to alleviate market concerns over potential shortages from a drop in Russian oil exports. The IEA also clarified April 7 that over the next six months, around 240 million barrels of emergency oil stocks -- the equivalent of well over 1 million b/d -- will be made available to the global market. That implies the total release would include the 62.7 million barrels announced by the IEA on March 9, 30 million barrels of which is coming from the US. At end-February, Japan held a total of around 469.09 million barrels of petroleum reserves, equating to 234 days of domestic consumption, comprising national petroleum reserves, oil reserves held by the private sector and a joint crude oil storage program with oil-producing countries, according to METI data released April 15. Crude stocks in the national oil reserves accounted for 286.06 million barrels of the total, while oil products in the national reserves comprised another 8.99 million barrels. Privately-held crude reserves totaled 78.31 million barrels, with oil products stocks at 89.57 million barrels, while 6.29 million barrels of crude were held by oil producers in Japan.

Low production, strong demand, and weak gasoline imports raised the question of whether gasoline prices will follow in diesel's record-setting footsteps this summer. US Gulf Coast pipeline ULSD's premium over CBOB has grown considerably since the start of the year. Although ULSD averaged just an 18.93 cents/gal premium over USGC pipeline CBOB in January and a 20.40 cents/gal premium in February, in March that premium spiked to 48.23 cents/gal. So far in April, Gulf Coast ULSD has averaged a 61.86 cents/gal premium over pipeline CBOB. With the spread between diesel and gasoline growing, refiners have been maximizing diesel runs. As gasoline production takes a backseat, however, it is just one of many market fundamentals pointing to an expensive summer. In the US Atlantic Coast, a key import hub for the US, European supply-side fundamentals have pressured first-quarter imports of gasoline and related blendstocks to their lowest levels in at least seven years. USAC production capacity has declined over recent years, following the closure of at least three refineries: Philadelphia's 335,000 b/d PES refinery in June 2019, the partial closure of PBF Paulsboro's 160,000 b/d refinery in New Jersey, and the idling of the 135,000 b/d Come-by-Chance refinery in eastern Canada, which was later acquired by Braya Renewable Fuels for conversion into a renewable fuel plant. "While gasoline demand will be closer to pre-pandemic levels, the impacts of higher prices are expected to negatively impact gasoline demand this summer," Debnil Chowdhury, vice president of refining and marketing at S&P Global Commodity Insights, said. US product supplied, or implied demand, of finished motor gasoline averaged around 8.6 million b/d in January-March, according to US Energy Information Administration data for rolling four-week averages. In the same period, demand averaged 8.1 million b/d in 2021, 8.8 million b/d in 2020, and 8.9 million b/d in 2019. USAC crude runs declined 30% in the first quarter of 2022 compared with the same period in 2019 prior to the June 21, 2019 fire at Philadelphia Energy Solutions that led to the shutdown of the East Coast's largest and oldest refinery, according to S&P Global Commodity Insights analytics data. Blendstock fundamentals The Organization for Economic Cooperation and Development, or OECD, Europe crude and feedstock run rates had also declined around 12% in the first quarter compared to 2017-2021 levels. "Going into the summer, there is less VGO available in the western hemisphere because of the Russia-Ukraine conflict," Chowdhury said. Vacuum gasoil, or VGO, is a vital feedstock for fluid-catalytic crackers to make gasoline and diesel. The US' reliance on Russian VGO has increased, as Caribbean refineries in Aruba and St. Croix closed. Much as diesel prices rose to meet hefty price spikes in natural gas used to power refineries, refiners need gasoline margins, or cracks, to improve to incentivize higher gasoline runs. The US Gulf Coast feedstocks market has been notably thin in recent weeks as market participants find alternatives to Russian feedstocks. USGC feedstocks sources say they are expecting cargoes to arrive from the Middle East as the market replaces Russian feeds. "Unless we see higher gasoline cracks, we won't see gasoline being produced," Chowdhury said. "Factor in that this will be the first post-pandemic summer, and demand is probably going to be higher than in 2021." To mitigate high domestic fuel costs and low gasoline production rates, the US government announced the release of 210 million barrels of oil from the Strategic Petroleum Reserve, or SPR. The US committed to releasing 30 million barrels March 1 in response to supply tensions caused by the Russia-Ukraine war. US President Joe Biden announced the release of an additional 180 million barrels from the SPR over a six-month period on March 31. Additionally, the US issued an emergency waiver April 12 to allow a blend of 15% ethanol in the summertime rather than the usual 10% maximum. Gasoline sources said the waiver is expected to have a minimal impact on the gasoline market. "Think it's more bullish [for] ethanol as [I] thought ethanol has been fairly balanced," an Atlantic Coast market source said. Summer expectations Atlantic Coast market sources said that summer grade supply of gasoline and naphtha is not problematic at the moment, although it is still too early to tell for summertime fundamentals. "Feels like everyone has F1," a fourth market source said, referring to the 7.4 RVP RBOB. While the impact on prices remains to be seen, fundamentals pointed to a tight summer unless something gives. In their Summer Fuels Outlook released April 12, the EIA said that retail gasoline prices were expected to reach an eight-year high this summer. "If this isn't settled, which it won't be, summer will be expensive," a fifth Atlantic Coast market source said. "Q2-Q3 will be an issue."

Petroecuador unveiled bids April 14 for a six-cargo 80 RON tender discounted to its gasoline formula in contrast to the diesel market where recent Latin American tenders have seen much higher premiums than the past. Ecuador's state-owned oil company received three offers for the 1.77 million barrels tender, with Trafigura offering to sell at a $1.51/b discount to the Platts US Gulf Coast unleaded 87 pipeline assessment from S&P Global Commodity Insights, while Novum had a $0.58/b discount and Glencore a $0.11/b premium, sources said. No official award was immediately announced, although sources said it would likely be awarded to Trafigura. Petroecuador's previous RON 80 tender for 590,000 barrels in October was awarded at a $0.66/b premium, also to Trafigura. The gasoline tender came after Petroperú and Petroecuador, starting late March, broke a month-long lull in large Latin American tenders, although the companies paid up to do so. Petroecuador paid a $7.45/b premium to the Platts benchmark USGC ULSD pipeline for seven cargoes of 50 ppm premium diesel, compared with slight discounts for previous tenders this year, sources said, while Petroperú paid a premium of $8.80/b, nearly double the premiums paid for January and February tenders for four ultra low sulfur diesel cargoes. Latin America is a flat price buyer and outright prices remain well above historical norms and have reached record levels for diesel. But outright prices and differentials for gasoline are relatively much lower than tenders for ULSD in the region. "Diesel is very short in Latin America at the moment," said Felipe Perez, Latin America downstream strategist for S&P Global. "Days of supply are quite low in almost all the major markets. Gasoline in Latin America will enter a lower demand seasonality, although demand has been quite robust." Winter slows driving demand for gasoline but creates more distillate demand for heating and power generation. The loss of Russian diesel supply into the global market that already experienced low inventories has already caused record global ULSD prices. Perez said that Petroperú is restarting its 95,000 b/d Talara oil refinery after a lengthy renovation that could reduce the need to import large volumes of refined products. The refinery began trial runs April 12 and expects to be operating fully in six months. But diesel demand was also strong because of spring harvest, especially in Argentina, where an industry group said diesel rationing has begun at service stations because price controls keep local prices 30% less than import prices, discouraging imports. The Platts assessments for gasoline and ULSD in Latin America have mirrored movements in the benchmark USGC markets, where finished gasoline settled at $3.3064/gal April 14, well below ULSD pipeline at $3.8948/gal. Comparatively, year-ago prices recorded USGC finished gasoline at $1.9880/gal, while ULSD trailed at $1.8425/gal. In Eastern Mexico, Platts assessed delivered CIF cargoes for ULSD up $4.73 at $162.84/b and for gasoline up $3.39 at $134.92/b April 14. Ecuador RON 93 CIF jumped $2.57 to $141.79/b and ULSD CIF rose $4.24 to $168.17/b. For import parity prices, ULSD prices in Peru rose $7.69 to $170.3/b and gasoline rose $4.94 to $1.4034/b. IPP prices for Santos, Brazil, rose $7.15 to $174.59/b for ULSD and $5.12 to $129.88/b for gasoline. "If prices stay as high as they are now, we might see a slightly demand destruction, but most of the governments in the region are doing some tax break or subsidy to alleviate the pain at the pump for consumers," Perez said.

Chinese refineries will slash throughput in April and lift oil product exports from initial plans to compensate for falling domestic demand due to COVID-19 lockdowns. As a result, 10 refiners from the 11 polled Sinopec and PetroChina refining sources said they have cut their April throughput by 30,000-100,000 mt from their initial planned volumes or plan to reduce. These include Sinopec's 14 million mt/year Shanghai Petrochemical, which has been locked down since late March. It will lower throughput by 40,000 mt to 1.19 million mt in April. The neighboring 8 million mt/year Anqing Petrochemical plant has trimmed throughput several times since April 1 to get the current target of about 550,000 mt from an initial 650,000 mt. Another neighbor, the 16 million mt/year private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand, according to a company source. Down south in Guangzhou, oil product sales are also slow. The 13.2 million mt/year Sinopec plant has cut throughput by 40,000 mt from planned to 990,000 mt in April. In eastern China's Shandong province, independent refineries have even cut their average utilization rates to 49.4% as of April 6, against 57.1% a month earlier, according to local information provider JLC. In northeast China, three of PetroChina's refineries in Liaoning province have reduced their April throughput by 30,000-50,000 mt from original plans, according to sources with the plants. Meanwhile, Russian crude imports by China's independent refiners slumped 44.4% year on year to a 10-month low of 1.5 million mt in March as a regular buyer ChemChina shut for maintenance its Huaxing Petrochemical. The volume is expected to fall further as a few independent refineries step away from Russian cargoes amid uncertainties in payment and shipping amid the ongoing Russia-Ukraine war and negative refining margins. Japan's largest refiner ENEOS does not plan to sign any Russian crude oil import contracts following Russia's invasion of Ukraine, ENEOS Holdings Chairman Tsutomu Sugimori said March 22. "Following the Ukraine invasion, we have not signed any contracts [for Russian crude]," Sugimori told an online press conference as the president of the Petroleum Association of Japan. "We do not expect to import [Russian crude] for the moment." ENEOS, however, will receive a few ships carrying Russian crude cargoes until April from its purchase contracts signed prior to the invasion in February, Sugimori said. Japan's second largest refiner Idemitsu Kosan has decided to suspend new Russian crude oil trades for imports amid uncertainty over payment and logistics disruptions, a company spokesperson told S&P Global Commodity Insights March 23. Cosmo Oil, Japan's third largest refiner, does not currently procure Russian crude oil, and it does not have any plans to procure the barrels, a Cosmo Energy Holdings spokesperson said March 23. Japanese refiner Taiyo Oil is currently seeking clarity about whether it can continue to lift term crude oil supply from Russia, which it relies on for 20%-30% of its crude procurement, amid uncertainty over payment settlements and shipping, a company spokesperson said April 4. Meanwhile, Japan's Ministry of Economy, Trade and Industry revoked March 31 Taiyo Oil's safety inspection permission at its sole 138,000-b/d Kikuma refinery at Shikoku in western Japan following its violations of safety regulations. Following the revocation, Taiyo Oil will now have to conduct a refinery maintenance program every year and get it approved by the local authorities until the company restores the permission, a METI official said. Prior to the suspension of its safety inspection permission, Taiyo Oil planned to shut two crude distillation units at the Kikuma refinery over May 30-Aug. 17 for a large scheduled maintenance program that takes place every four years. Separately, Japan's largest refiner ENEOS said March 28 it restarted the 170,000 b/d No. 2 crude distillation unit at the Kawasaki refinery in Tokyo Bay on March 25 after it was shut March 16 due to earthquake-led power outages. ENEOS said April 4 that it plans to restart the distillation unit at the Sendai refinery in the northeast and the Chiba refinery in Tokyo Bay in mid-April. At the Sendai refinery, all refining units were shut while all refining units at ENEOS's Chiba Refinery and the No. 2 crude distillation unit at the 247,000 b/d Kawasaki refinery, both in Tokyo Bay, were suspended. In other news, China aims to develop renewables-based hydrogen and curb fossil fuel-based hydrogen production which currently dominates the nation's hydrogen supply, according to its hydrogen industry development plan. The development plan jointly released by China's top economic planner National Development and Reform Commission, or NDRC, and energy regulator National Energy Administration lays out high-level guidelines for its hydrogen supply chain from 2021 to 2035. China has already become the world's largest hydrogen producer with 33 million mt/year of supply, but 63.5% of this is produced from coal, 21.2% as industrial byproduct, 13.8% from natural gas and only 1.5% from water electrolysis that is not fully powered by renewables-based electricity, according to the China Hydrogen Alliance. Quantitative targets are only set up until 2025, including building up 100,000-200,000 mt/year of renewables-based hydrogen production, realizing 1 million-2 million mt/year of CO2 emissions reduction and 50,000 hydrogen fuel cell vehicles or FCEVs by 2025, the report said. By 2030, the plan aims to build up a more comprehensive supply system for clean hydrogen and enable broad applications of hydrogen in different sectors to support China's carbon peaking 2030 target. By 2035, the plan expects to have a more sophisticated ecosystem for hydrogen, covering diverse applications in transportation, energy storage, industrial and other sectors. Renewables-based hydrogen will occupy a significantly increasing share in China's energy consumption mix and become an important backbone for the nation's energy transition, the plan said. NEW AND ONGOING MAINTENANCE Refinery Capacity b/d Country Owner Unit Duration Negishi 270,000 Japan ENEOS Part Closure'22 Wakayama 127,500 Japan ENEOS Full Closure'23 Kikuma 138,000 Japan Taiyo Oil Full May Hainan 184,000 China Sinopec Full Mar Jinzhou 150,000 China Petrochina Full Apr Yangtz 290,000 China Sinopec Full Mar Tahe 100,000 China Sinopec Full Mar Huaxing 140,000 China ChemChina Full Apr UPGRADES Zhenhai 230,000 China Sinopec Expansion NA Jinling 420,000 China Sinopec Upgrade NA Haiyou 70,000 China Haiyou Upgrade On hold Huizhou 440,000 China CNOOC Upgrade NA Chiba 190,000 Japan Idemitsu Upgrade 2020 Changling 230,000 China Sinopec Upgrade NA Qinzhou 240,000 China Guanxi Upgrade 2023 Fujian 280,000 China Sinopec Upgrade NA LAUNCHES Tangshang 300,000 China Xuyang Group Launch 2021 Jieyang 400,000 China Guandong Launch 2021 Huajin Aramco 300,000 China Joint Launch 2024 Lianyungang 320,000 China Shenghong Launch Launched Yulong 400,000 China Yulong Launch 2022 Near-term maintenance New and revised entries Japan ** Japan's Cosmo Oil shut one of two crude distillation units at its 177,000 b/d Chiba refinery in Tokyo Bay after a fire at a furnace April 2, a company spokesperson said April 5. The fire broke out at around 6:15 pm local time (0915 GMT.) April 2, and the local fire department confirmed that it was put out at 11:45 pm, the spokesperson said. No one was injured, and it was not clear when Cosmo would be able to resume the CDU, the spokesperson said. China ** PetroChina's Yunnan Petrochemical refinery in southwestern Yunnan province, which shut its 4 million mt/year residual hydrogenation unit and some of its relative downstream facilities due to a blast in December, is fully back online. ** ChemChina has shut for maintenance its Huaxing Petrochemical. Works started on March 15. Existing entries China ** Sinopec Hainan plans to completely shut for nearly two months of scheduled maintenance March 15-May 10, and there will no oil products exports in April. The Hainan refinery plans to process 370,000 mt of crude oil in March, which would be equivalent to about 47% of its nameplate processing capacity, down from 102% in February. ** PetroChina's Liaohe Petrochemical will shut for maintenance over April-June. ** Sinopec's Yangtz Petrochemical is scheduled to shut the entire refinery for maintenance over March-April. ** Sinopec's Tahe Petrochemical is scheduled to shut for maintenance from mid-March to late April. Japan ** Japanese refiner Taiyo Oil plans to shut two crude distillation units at its sole Kikuma refinery over May 30-Aug. 17 for scheduled maintenance, a company spokesperson said March 8. It will halt a 106,000 b/d No. 1 CDU and a 32,000 b/d No. 2 CDU. "This will be a large-scale planned maintenance [which is done] every four years, and we plan to shut the No.1, the No. 2 CDUs and the [32,000 b/d] RFCC at about the same time," the spokesperson said. ** Japan's largest refiner ENEOS will decommission the sole 127,500 b/d crude distillation unit at its Wakayama refinery in western Japan in October 2023. ** Japan's ENEOS will decommission the 120,000 b/d No. 1 CDU at its 270,000 b/d Negishi refinery in Tokyo Bay in October 2022. It will also decommission secondary units attached to the No. 1 CDU, including a vacuum distillation unit and fluid catalytic cracker. ENEOS will also decommission a 270,000 mt/year lubricant output unit at the Negishi refinery. Upgrades Existing entries ** Sinopec plans to add a petrochemical plant to its Fujian refining complex as part of its phase two expansion plans, according to a company source. "An ethylene plant will likely be added," said the source, without giving more details as the plans are still in early stage. The adding of the new chemical plant, will likely help lift the overall run rates at the refinery, sources said. On March. 8, Saudi Aramco and Sinopec said they would study possible capacity expansion at the Fujian refinery. The two companies will undertake a feasibility study looking into "optimization and expansion of capacity", Saudi Aramco said in a statement. ** Chinese Sinopec's refinery Zhenhai Refining and Chemical has a 27 million mt/year refining capacity and a 2.2 million mt/year ethylene plant, after its phase 1 expansion project of 4 million mt/year crude distillation unit and a 1.2 million mt/year ethylene unit was delivered end-June. The company aims to grow its refining capacity to 60 million mt/year and 7 million mt/year of ethylene by 2030. ** PetroChina's Guangxi Petrochemical in southern Guangxi province planned to start construction at its upgrading projects at the end of 2021, with the works set to take 36 months. The projects include upgrading the existing refining units as well as setting up new petrochemical facilities, which will turn the refinery into a refining and petrochemical complex. The project will focus on upgrading two existing units: the 2.2 million mt/year wax oil hydrocracker and the 2.4 million mt/year gasoil hydrogenation refining unit. For the petrochemicals part, around 11 main units will be constructed, which include a 1.2 million mt/year ethylene cracker. ** Sinopec's Changling Petrochemical in central Hunan province plans to start construction for its newly approved 1 million mt/year reformer. ** Japan's Idemitsu Kosan plans to start work on raising the residue cracking capacity at its 45,000 b/d FCC at Chiba. ** Axens said its Paramax technology has been selected by state-owned China National Offshore Oil Corp. for the petrochemical expansion at the plant. The project aims at increasing the high-purity aromatics production capacity to 3 million mt/year. The new aromatics complex will produce 1.5 million mt/year of paraxylene in a single train. ** Construction of a new 1 million mt/year coker at Chinese independent refinery Haiyou Petrochemical, in eastern Shandong, has been put on hold. ** Sinopec's Jinling Petrochemical refinery in eastern China will build a new 600,000 mt/year VDU. Launches New and revised entries ** Private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand. The refinery initially planned to start up in end August, but this was postponed to end-December and then to January. ** PetroChina has started constructing a low sulfur bunker fuel oil project with 2.6 million mt/year production capacity at its upcoming Guangdong Petrochemical. PetroChina targets to commission Guangdong Petrochemical by end-2022. The Guangdong plant is PetroChina's latest greenfield integrated refinery in southern China Jieyang city, featured with a 2.6 million mt/year aromatics unit and a 1.2 million mt/year steam cracker. Existing entries ** Saudi Aramco said it has "taken the final investment decision" to participate in the development of a major refinery and petrochemical complex in China which is expected to be operational in 2024. The complex will be developed by Huajin Aramco Petrochemical Company (HAPCO), a joint venture between Aramco, North Huajin Chemical Industries Group Corporation and Panjin Xincheng Industrial Group. The decision is subject to finalization of transaction documentation, regulatory approvals and closing conditions. The project represents an opportunity for Aramco to supply up to 210,000 b/d of crude feedstock for the complex. The complex involves a 300,000 b/d refinery, 1.5 million mt/year ethylene-based steam cracker and a 1.3 million mt/year PX unit, S&P Global Commodity Insights has reported previously. ** Honeywell said China's Shandong Yulong Petrochemical will use "advanced platforming and aromatics technologies" from Honeywell UOP at its integrated petrochemical complex. The complex will include a UOP naphtha Unionfining unit, CCR Platforming technology to convert naphtha into high-octane gasoline and aromatics, Isomar isomerization technology. When completed Yulong plans to produce 3 million mt/year of mixed aromatics. Shandong's independent greenfield refining complex, Yulong Petrochemical announced the start of construction work at Yulong Island in Yantai city at the end of October 2020. Construction was expected to be completed in 24 months. The complex has been set up with the aim of consolidating the outdated capacities in Shandong province. A total of 10 independent refineries, with a total capacity of 27.5 million mt/year, will be mothballed over the next three years. Jinshi Petrochemical, Yuhuang Petrochemical and Zhonghai Fine Chemical, Yuhuang Petrochemical and Zhonghai Fine Chemical will be dismantled, while Jinshi Asphalt has already finished dismantling. ** China's coal chemical producer Xuyang Group has announced plans to build a greenfield 15 million mt/year refining and petrochemical complex in Tangshang in central Hebei province.

The Singapore low sulfur fuel oil supply is expected to remain tight in the April 11-15 trading week as higher gasoil crack spread continuously draws LSFO blending components to the middle distillate market. The high sulfur fuel oil market is also likely to stay strong in the week due to a decline in an inflow of the Middle Eastern cargoes into Asia after the Russia-Ukraine conflict. Crude oil futures opened lower in Asia April 11, with June ICE Brent trading at $100.47/b at 0300 GMT, down $1.11/b from the 0830 GMT Asian close April 8. Marine Fuel 0.5%S ** Singapore Marine Fuel 0.5%S May-June swap spread weakened in April from March. The front-end time spread averaged $21.29/mt over April 1-8, down from $30.42/mt in March, S&P Global Commodity Insights data showed. Market sources said supply would stay tight despite weaker time spread as sulfur and viscosity cutter stocks, such as vacuum gasoil and light cycle oil are taken by the gasoil market as the gasoil crack spread has been strong, fuel oil traders said. The time spread has weakened following Brent swaps while the front-end May-June spread averaged $1.27/b over April 1-8, down from $3.33/b in March. ** Market optimism in the downstream bunker market stemmed from a less-than-ample availability of finished grade product, especially for delivery on a prompt basis; only a few suppliers were still in a position to offer product to the spot market for delivery less than around 10 days, traders said. ** The delivered market was pricing higher on account of a rising replacement cost for bunker sellers due to a firming upstream market, traders said. The premium for Singapore-delivered marine fuel 0.5%S bunker over the benchmark upstream Singapore marine fuel 0.5% cargo assessment averaged $29.92/mt in the week ended April 8, up from the previous week's average of $23.65/mt, S&P Global data showed. ** Market volatility is still likely to cap demand for Singapore-delivered marine fuel 0.5%S, whereas stockpiles in the downstream market was heard balanced against demand, according to local bunker suppliers. ** In Fujairah, a tight prompt availability situation coupled with limited slots available for scheduling barge delivery of IMO-compliant product on a prompt basis to the spot market was likely to help set a floor for Fujairah-delivered marine fuel 0.5%S bunker premium. ** Uptick in LSFO bunker demand is likely to drawdown inventories at the port of Hong Kong for the rest of April, following the easing of quarantine measures for bunker-only calls since April 1, bunker suppliers said. ** Traders anticipate LSFO bunker inventory shortfalls in Japan to prolong despite the resumption of loadings for smaller parcels expected during the week started April 11 at Idemitsu and ENEOS refineries. ** Steady downstream demand for Zhoushan-delivered marine fuel 0.5%S amid limited availability of the ex-wharf grade is expected to buoy premiums, according to market sources. High Sulfur Fuel Oil ** Both 180 CST and 380 CST grades are expected to remain tight as US refiners increasingly take HSFO from the Middle East as they are no longer buying Russian fuel oil. ** The 180 CST grade is tight in particular as demand from South Asia has been surging. As a result, the Singapore 180 CST cash differential to MOPS strip rose to $31.66/mt on April 8, the highest since Nov. 5, 2019, when it stood at $34.66/mt, S&P Global data showed. The 180 CST-380 CST spread hit an all-time high for three days in a row to rise to $56.75/mt on April 8, S&P Global data showed. ** The prevailing concerns around contaminated fuel at the city-state were also limiting the number of suppliers to source the product from, bunker traders said. Tight prompt availability has meant that the earliest that most suppliers are able to offer product to the spot market is around 10 days forward. ** This in turn was likely to have a cascading effect on Singapore-delivered 380 CST high sulfur bunker premium, which has indeed sky-rocketed in the recent days. The premium for Singapore-delivered 380 CST high sulfur bunker over Singapore 380 CST HSFO cargo, which averaged $33.88/mt in the week ended April 8, was up from the previous week's average of $23.83/mt, and stood at a near two-year high $36.67/mt on April 8, S&P Global data showed. ** Amid above-average volumes of fixtures since April, bunker suppliers expect rising upstream availability of HSFO cargoes in Hong Kong to supply the strengthening downstream demand. ** The recent diversion of inquiries for delivered HSFO to South Korea is expected to lift bunker demand while stockpiles remain ample, as buyers were heard skipping bunker-only calls in Singapore amid quality concerns.

Weather delays at major East Coast Mexico products ports and a challenging gasoline arbitrage on the 37,000 mt UK Continent-US Atlantic Coast route stand in the way of loading clean petroleum products on the US Gulf Coast and transporting them to the current high demand regions in South America and across the Atlantic. A week-long fixing spree over March 30-April 8 has led freight to surge 125% on the 38,000 mt USGC-Transatlantic runs and 98% and 100% on the interregional benchmark routes to Chile and Brazil. Market participants said April 8 that Americas clean tanker rates could continue at current peak levels for a while longer. "There are still cargoes working 15-20 windows where supply of tonnage is thin," said a shipowner. "Maybe in a few weeks with ballasters [freight] might level out." The Americas clean tanker markets have witnessed a hefty fixing spree since March 31, leading to depleted tonnage and pushing freight to impeccable heights. Freight for the 38,000 mt USGC-Transatlantic runs were last assessed at w450 April 8, up w100 on the week and w185 on the peak rate during the floating storage boom, when freight was assessed at w265 April 27, 2020, according to data from S&P Global Commodity Insights. Weather-related delays at Mexico's eastern ports have added to concerns over tanker tonnage replenishment on the USGC, following heightened charterer inquiries to cover diesel and naphtha stems in place of self-sanctioned Russian barrels and strong diesel demand on the USGC-Caribbean and USGC-South America runs. Mexico delays Roughly 27 Medium Range tankers have been waiting to discharge at the East Coast Mexico ports of Tuxpan, Pajaritos, Veracruz and Tampico since April 7, as a cold front has caused some ports to close completely, market sources said. While the port of Pajaritos is allowing already docked ships to unload product, Tuxpan is not letting any tankers operate, making seven MRs, which typically carry 38,000 mt of refined product, buoy nearby, according to market sources based in Mexico. "Ships that have already entered the Tuxpan port prior to the close are allowed to unload, but the rest are buoyed, it's been provoking certain delays," said a market source based in Mexico. Although proximity was not an issue compared with ships ballasting from longer-haul destinations, such as Brazil, Chile, or even Europe, where round trips range between 22-36 days at a speed of 13 knots, delays for tankers that usually recycle back to USGC from short-haul trips within seven to 14 days had exacerbated the current extremely tight tonnage count. "We've been having a ton of demand recently, especially since we've lifted [pandemic] restrictions, schools are back in session, and the traffic has been seen returning to pre-pandemic levels," said the market source. The situation is expected to resolve by April 9, as the cold front that hit the Gulf of Mexico has already affected a day's worth of operations, but the Americas clean tanker markets are already operating on a delicate scale. "I think this will last not a month, but maybe a few more weeks, it's just not sustainable for charterers," said a shipbroker, referring to charterer's resistance to keep freight at sky-high levels. Tonnage reduced from Europe A challenging gasoline arbitrage on the front-haul 37,000 mt UKC-USAC route is set to shorten available tonnage on the USGC further, decreasing the number of tankers usually ballasting to the USGC after discharging gasoline. Northwest European gasoline exports to the USAC are expected to fall sharply in the week to April 10, as high European flat prices are causing a buildup of unsold cargoes in the Amsterdam-Rotterdam-Antwerp trading hub for prompt delivery, market sources said. About 102,000 mt gasoline were expected to load in Northwest Europe for export to the USAC in the week started April 4, down 100,000 mt on the week, according to Kpler shipping data.

War-torn Ukraine is increasingly reliant on fuel supplies via truck from Poland following the destruction of up to 20 major fuel depots, damage to its main refinery, and the cutting of Black Sea shipping routes, Ukrainian experts say. Russia's military assault on northern Ukraine has abated in recent days, but as the focus of military activity shifts to the east, the country faces increasingly stretched fuel supply, Serhiy Kuyun, head of the A-95 fuel consultancy, told S&P Global Commodity Insights. Ukraine has long been shifting away from Russian energy and previously took Azeri crude by sea for the Kremenchuk refinery and diesel from northern neighbor Belarus. It also hosts the Odesa-Brody pipeline from the Black Sea into Central Europe. But the Russian invasion meant cutting supplies from Belarus, which has supported Moscow, and Black Sea security risks and a Russian blockade have stopped shipments from Azerbaijan and Romania, the latter previously a source of fuel supply by sea. With crucial infrastructure now damaged and the geography of the Carpathian Mountains preventing supply from other neighbors, Ukraine is now largely dependent on Poland; the latter is in the process of merging its two main refineries under PKN Orlen, which also operates Lithuania's Mazeikiai. "The market has not stopped, but it has been forced to adapt," Kuyun commented in a statement. "There are no stocks of fuel anymore. We're selling as soon as fuel tanker truck arrives." In the course of March, Russia's navy targeted fuel depots across the country, including in Lviv, Lutsk, Ternopil, Rivne, Zhytomyr, Odesa, Poltava, Kyiv, Chernihiv, Kharkiv and Dnipro. Then on April 2 the 240,000 b/d Kremenchuk refinery was badly damaged in a Russian missile attack, putting it out of action, according to regional and company officials. Ukraine's second refinery, the Shebelinka Gas Processing Plant in the east of the country, was taken offline Feb. 26 due to the threat of shelling. Kuyun added that the stricken fuel depots were mostly full early in March, with later attacks coming when stores were already depleted. The country now faces not only a shortage of fuel, but a squeeze on trucks available for bringing in fuel, he said. "More fuel trucks are needed that can bring fuel directly from abroad," Kuyun said. "It is necessary that every owner of a fuel tanker truck has the opportunity to go and buy fuel." Ukraine's government is also liaising with state railroad company Ukrzaliznytsia to make sure supplies can also come by rail. Price liberalization Kuyun advised the government should cancel price controls and lift restrictions on maximum gasoline and diesel retail prices to encourage private traders to import more. "I know of three regional fuel chains that have already stopped selling fuel in the last two days because the cost is higher than the set prices," he said. "Even large players are forced to limit sales, because new batches of fuel arrive at the pump, but its cost is already beyond the established price corridor." The Ukrainian parliament on March 15 cancelled excise tax on all kinds of fuel and lowered VAT to 7% from 20% on imports of gasoline and diesel fuel. The lower taxes create an incentive for private fuel suppliers to arrange more supplies and help to reduce prices at retail stations. The government also ordered the state customs service to remove bureaucracy from customs clearing of fuel imports. Planting season While the turmoil of war and a flow of refugees out of the country will have impacted demand, the lack of refining capacity also poses a challenge for the vital grain sowing season — Ukraine being an important source for global grain markets. Ukraine is likely to reduce the area planted with grain crops by up to 30% because of fighting in eastern and southern regions, in turn reducing the demand for fuel, according to the government. In 2021, Ukraine imported 8.79 million mt of petroleum products, up 9.6% from 8.02 million mt in 2020, according to the state customs service.