Lower China exports may moderate fall in Asian gasoline cracks

The fall in Asian gasoline cracks amid a narrowing US-RBOB Brent crack may be curbed by a decline in China's exports, market participants said.

Platts assessed the US RBOB-Brent crack at $7.16/b at the Asian close Oct. 4, narrowing on the day from $10.65/b, and on the week from $12.53/b, S&P Global Commodity Insights data showed.

The front-month FOB Singapore 92 RON gasoline swap crack was assessed up 90 cents/b at $3.85/b on Oct. 3 after falling for four consecutive sessions, before sliding again to $1.89/b on Oct. 4, Platts data from S&P Global showed.

Some market participants said China's gasoline exports may decline in the near term, which could give some support to Asian gasoline cracks.

"I think China's exports should drop if there is no new quota. Also, export margins went down, so there's less incentive for China to export," an industry source said.

Other market participants said Chinese exporters were discouraged from exporting gasoline out of the country as China's domestic gasoline prices were far higher than international gasoline prices.

"Shandong area 92 RON gasoline prices were heard at around Yuan 8,900/mt ($1,235.87/mt) and some teapot refineries were heard selling gasoline domestically at Yuan 8,800/mt ($1,221.98/mt)," a trader with knowledge of the matter said.

Platts last assessed the physical FOB Singapore 92 RON gasoline price at $91.44/b at the Asian close Oct. 4 down from $94.29/b Oct. 3, S&P Global data showed.

Sourced added that domestic demand for gasoline in China could be buoyed by high levels of internal travel amid the Golden Week holidays.

However, some market participants cautioned that movements in the US-RBOB Brent crack remained the primary factor affecting shifts in the Asian gasoline crack.

Low US demand

US gasoline demand was expected to fall amid a surge in US gasoline stocks, expectations of poor US winter demand and flooding in the US.

Total US gasoline stocks shot up by 6.481 million barrels on the week to 226.984 million barrels in the week ended Sept. 29, US Energy Information Administration data released Oct. 4 showed.

Total US gasoline supplied, a proxy for US gasoline demand, fell 604,000 barrels on the week to 8.014 million barrels in the week ended Sept. 29, the data showed.

Domestic gasoline demand in the US was expected to face some downward pressure as heavy flooding was heard limiting overall mobility, sources said.

A flood advisory had previously been issued for residents living in the south of Las Vegas Valley on Oct. 1, local media reported.

Additionally, Mexican demand for Asian cargoes was expected to fall in October following the end of the summer driving season, sources said.

"I expect Mexico to pull only three-four cargoes of gasoline from Asia in October, much lower than around 10 cargoes in September," a trader said.