Increased Asian mobility to support refinery runs and tanker trade

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By Jane Xie, SSY Tanker Research Analyst

A sustained recovery in Asia’s mobility coupled with limited oil product exports from China are buoying Asian refining margins, and this is expected to prompt further raising of throughput in Asia to meet rising oil demand, a boon to tanker trade flows. According to Apple’s mobility index, Australia, Indonesia and Malaysia (which make up at least 1M b/d of combined oil product import requirements) have held above pre-pandemic levels (with 13 January 2020 as the reference point), through most of October. This is driving a rise in gasoline trade, with Asia’s largest gasoline importer, Indonesia, anticipated to buy 350K b/d of gasoline over October-November, Argus reported, up from an average of 300K b/d over January-August, customs data showed. This represents an additional 5-6 MRs each month over Oct-Nov to meet the incremental demand. Consequently, Asian gasoline margins have also jumped to a near six-year high.

As Asian oil demand rises, oil product supply from key regional exporter, China, is being curtailed by a squeeze in product export quotas for the rest of the year and stronger domestic demand. So far, the government has issued 37M tonnes of product export quotas to be used in 2021, and according to customs data, 33.7M tonnes of products have been already been exported over January-September. This leaves just 4.3M tonnes to be utilized for the 4Q21. In comparison, 11.5M tonnes of products were exported in 4Q20. While Beijing is reportedly planning to allow its oil companies to temporarily convert fuel oil export quotas to cover gasoline, gasoil and jet fuel shipments, this is set to have a marginal impact as top fuel oil quota holders, PetroChina and Sinopec, have used up majority of their fuel oil allocations.

This is expanding opportunities for other North Asian refiners, such as in South Korea, Japan and Taiwan, to boost their refinery runs and raise exports to meet the region’s import requirements. In particular, South Korea’s gasoline exports increased to a record high of 300K b/d in September, up about 35K b/d m-o-m, and nearly 30K b/d from the January-August average, data from the Korea National Oil Corp showed. These constructive elements have helped lift Sing-Aus and SK-Sing MR rates off their recent lows and with other SE Asian countries such as Vietnam, Thailand and the Philippines edging towards pre-pandemic mobility, regional product tanker rates should have more room to firm further into 4Q.

Apple Mobility Index

Source: Apple (as of 26 October 2021)

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