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Asia Products Outlook-Balanced, China demand eyed

SINGAPORE: Asian oil products were seen largely balanced this week on steady fundamentals and in the absence of fresh direction, traders said on Tuesday.

They said gas oil had mostly passed the stage of being a star performer, which it enjoyed in the last two weeks, as there were signs of a weaker trend ahead.

Traders said they expect refinery runs to move up slightly from the second half of February due to improved margins in the previous two weeks.

"Refinery output is likely to pick up soon while demand is weak due to the Lunar New Year," one trader said.

Hong Kong-based traders said on Tuesday demand was slow as most Chinese buyers had not returned from the long holiday break.

Traders were hoping for a resumption in gas oil purchases from mainland China during the Lunar New Year as Chinese customs were seen loosening control over small fishing boats, integral in the smuggling of gas oil into south China.

"Business was great in the last few days before the new year, but not today," said the trader.

Markets re-opened on Tuesday in Hong Kong.

One Hong Kong-based terminal operator said they expected to quote free-on-board gas oil at $225-230 per tonne on Tuesday, stable from the level seen late last week.

CHINA LIES LOW AGAIN

Asian fuel oil prices were also expected to move in line with crude in a generally balanced market, traders said.

They said that the lack of arbitrage exports into Asia was offset by the absence of key buyer China.

Chinese buyers were expected to return mostly to cover March requirements only at the end of this week.

They said the expected refinery run hikes in Singapore and Thailand from the second half of February would have little impact on the market due to the incremental supply.

Singapore light distillates were also seen remaining stable with little worries over fundamentals, traders said.

Indian industry sources told Reuters that Reliance was expected to export three naphtha cargoes totalling 100,000 tonnes for February loading.

But traders largely shrugged off the pressure, citing the lower quality of the Indian material.

They said all three cargoes were off-specification heavy naphtha with low paraffin content.

Traders expected Reliance to start exporting around three cargoes of qualified full-range naphtha only from April.

"They are likely to cast some pressure on the market only after then (April)," said one trader.-Reuters