Indonesia's Pertamina defers gasoline imports from May to June on weak demand: traders

Indonesia's Pertamina has delayed the purchase of a few gasoline cargoes to June amid high inventories and slower-than-expected domestic demand, traders told S&P Global Commodity Insights May 3.

The deferment is for one to two gasoline cargoes, said a source close to the matter, without sharing exact volumes. But a Singapore-based trader said the total volume was around 600,000 barrels.

The company had previously deferred April-loading barrels to May, but the deferment volumes could not be confirmed.

The development comes as sales of gasoline in Indonesia have been slower than expected, despite March and April being a peak demand season in the country due to Ramadan and Eid al-Fitr celebrations.

Indonesia's May gasoline demand is also expected to fall on the month following the end of the Eid al-Fitr festivities, sources said.

"Sales [of gasoline] in April is around 2%-3% lower than our expectations," an Indonesia-based source said, adding that higher retail prices have dampened demand for the motor fuel.

"I guess the 30% price increase of subsidized gasoline last year is really [having an] effect on demand," the source said.

The Indonesian government reduced the fuel subsidy on Sept. 3, 2022, which resulted in a 30% spike in fuel prices.

The most popular 90 RON gasoline grade, known as Pertalite, rose to Rupiah 10,000/liter, from Rupiah 7,650/liter after the subsidy cut.

Pertamina is expected to import around 9.5 million-10.5 million barrels of gasoline for May, down from an estimated 11 million-12 million barrels in April.

The May import volumes are also below last year's level. Indonesia imported 1.472 million mt (12.5 million barrels) of gasoline in April 2022 and 1.488 million mt (12.65 million barrels) in May last year, according to data from Statistics Indonesia.

Inflation, tepid consumer sentiment

South Korea saw its gasoline exports to Indonesia fall to just 680,000 barrels in the first quarter, down 58% from a year earlier and sharply below the average quarterly shipments of 1.9 million barrels in 2022, showed latest data from state-run Korea National Oil Corp.

The US dollar's strength against a wide range of East Asian currencies and high consumer prices would continue to hurt household and private spending across Indonesia and limit oil product imports from key supply sources including South Korea and Singapore, according to a distribution and inventory management source at Pertamina and a gasoline trader based in Singapore.

"Inflation had recently cooled to some extent but consumer and business confidence seems very weak as it [annual inflation rate] still remains well above [the monthly] average of around 1.7% just few years ago," the distribution management source at Pertamina said.

Indonesia's annual inflation rate eased to an 11-month low of 4.33% in April from 4.97% in March, government data showed. However, the rate remained above the central bank's target of 2%-4% for 11 consecutive months.

"Southeast Asia is an important export outlet for South Korea but weak cracks clearly explain the fragile demand and oversupply conditions in the regional market," said a gasoline and diesel marketing manager at a major South Korean refiner based in Seoul.

"It may be a struggle [for South Korea] to sell more than 1 million barrels [of gasoline to Indonesia] in the second quarter," he added.

Naphtha demand falls

Meanwhile, the decline in Indonesia's gasoline demand has also curbed consumption of naphtha as a lower octane gasoline blendstock, which coincides with an anticipated drop in the country's gasoline imports, sources said.

The Asian naphtha complex has long been hampered by anemic downstream petrochemicals demand and thin olefin margins, which was further compounded by steam cracker turnaround season and global economic instability.

The Singapore reforming spread -- the difference between Singapore 92 RON gasoline and the Singapore naphtha derivative -- widened 60 cents/b, or 2.79%, on the week to $22.1/b at the Asian close May 2, S&P Global data showed.