Refinitiv Asia Gasoline

Special Report

Refinitiv Oil Research | Singapore

Charles Ong (Senior Analyst, Light Distillates)
charles.ong@lseg.com

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Contents

Gasoline summary ....................................................................................................................... 3

Highlights ..................................................................................................................................... 3
Special Report: Asia Gasoline Outlook.................................................................................... 4
Price benchmarks fall from record highs; Beijing issues rare fifth tranche of oil export quotas . 4
China cuts gasoline exports coming into 2023 as demand rebounds, lifting price benchmarks 6
Supply from India, other Northeast Asian exporters capped ..................................................... 7
Australia and Indonesia imports on the rise as demand recovers ............................................. 8
Tighter regional supply to support market in near-to-medium term ........................................... 8
Oil Research Asia Contact List .................................................................................................. 10

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Gasoline summary
Consumption of transportation fuels, notably gasoline, will finally return to normal in 2023,
Refinitiv Oil Research believes, three years after the World Health Organisation (WHO) first
declared COVID-19 a global health emergency and resulted in more than 6.8 million deaths.

The Asian gasoline market will build on this momentum in 2023 amid shrinking regional supply
due to the shutdowns of refining capacities over the past three years, accelerated by the
pandemic.

On the other hand, demand is returning to pre-pandemic levels as movement restrictions

globally gradually eased. Even China, where some of the strictest pandemic-related curbs were
imposed, due to the country’s zero-Covid policy, have been significantly relaxed at the end of
last year.

Downside risks nonetheless persist amid recessionary worries as the world continues to battle
against inflation, while an air of uncertainty still hangs over Russia’s long drawn conflict with
Ukraine.

Highlights
• China outflows dip as domestic demand recovers
• Asia refining margins for gasoline edges higher at start of year
• Refinery turnarounds to limit outflows from key exporting countries
• Import requirements in Southern hemisphere strengthens

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Special Report: Asia Gasoline – Tightening supply,

improving demand
Consumption of transportation fuels, notably gasoline, will finally return to normal in 2023,
Refinitiv Oil Research believes, three years after the World Health Organisation (WHO) first
declared COVID-19 a global health emergency and resulted in more than 6.8 million deaths.

The Asian gasoline market will build on this momentum in 2023 amid shrinking regional supply
due to the shutdowns of refining capacities over the past three years, accelerated by the
pandemic.

On the other hand, demand is slowly but surely recovering as movement restrictions globally
gradually eased thru 2022. Even China, where some of the strictest pandemic-related curbs
were imposed, due to the country’s zero-Covid policy, have been significantly relaxed at the end
of last year.

Downside risks nonetheless persist amid recessionary worries as the world continues to battle
against inflation, while an air of uncertainty still hangs over Russia’s long drawn conflict with
Ukraine.

Downside risks nonetheless persist amid recessionary worries as the world continues to battle
against inflation, while an air of uncertainty still hangs over Russia’s long drawn conflict with
Ukraine.

Price benchmarks fall from record highs; Beijing issues rare fifth tranche of
oil export quotas
Demand for transportation fuels were adversely hit as people were initially grounded in the
aftermath of the lockdowns worldwide brought about by COVID-19. Hit hard financially,
governments were eager to boost economic activities. The West emerged as the first out of the
blocks, where societies were seen returning to “normal” life, and drastic large-scale lockdowns
largely done away with. Most countries in Asia then followed suit. Borders reopened, and road
usage increased. Commuters’ preference for personal vehicles over public transport further
propped up the demand baseline.

A resulting confluence of factors, including the peak summer driving season in the Western
hemisphere and short-term supply woes in Asia arising from stronger demand in the face of
capacity shutdowns that limited outflows from several key gasoline-producing countries, lifted
the Asia gasoline 92RON-Brent prompt crack to record highs past $30/bbl in 2Q 2022.

The front-month gasoline 92R intermonth spread likewise widened past levels at $7/bbl in
backwardation over the same period on the back of firm market fundamentals.

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These gains, however, eroded with refining margins eventually slipping into the red towards end
Q3. Price benchmarks were depressed for prolonged periods in the final quarter of the year as
coronavirus-enforced lockdowns imposed in some of China's most populous and economically
important cities, including Beijing, Shanghai, and Chengdu, stoked demand worries.

Weaker buying interest from some key regional importing countries also pressured on the
market, while high pump prices can also be seen biting into consumer demand. Reflecting this,
4Q inflows to Australia and Indonesia averaged at only 1.52 million mt/month versus 3Q’s 1.96
million mt/month and the 2022 monthly average of about 1.8-1.9 million mt.

Beijing's issuance of a rare fifth tranche of oil product export quotas, a combined massive 16.5
million mt for clean refined products awarded over the space of two weeks in September, led to
Chinese refiners ramping up gasoline exports for the remaining months of the year on the back
of sluggish domestic demand and ample inventories.

Outflows surged from a mere 660,000 mt in September rose to a record high of slightly over 1.9
million mt in December, with the Q4 monthly average at 1.47 million mt, well above the monthly
average for the year at 1.05 million mt.

Lower outflows from other major exporting countries in Asia, however, limited the supply upside.
India’s exports, for instance, were capped at below 1 million mt for the three consecutive
months of September-November on the back of healthy domestic demand and amid heavy
refinery turnarounds, prompting state-owned refiners to seek seaborne imports to cover the
domestic shortfall.

Over in South Korea, outflows were likewise limited due to refinery maintenance shutdowns,
with shipments averaging at some 950,000 mt for 4Q, down from the 2022 monthly average of
1.02 million mt.

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China cuts gasoline exports coming into 2023 as domestic demand

rebounds, lifting price benchmarks
China’s reversal of its zero-Covid policy in late-2022 however boosted the global outlook for fuel
demand in 2023, with the easing of measures immediately prompting a significant pick up in
mobility.

The number of passenger cars on its highways reached 31.88 million on Feb 07, higher by
22.5% versus 2019 and up by 14.6% against the same time last year, official data showed.

Despite being equipped with fresh export quotas for refined products totalling 18.99 million mt
for 2023, the country’s exports of gasoline have fallen drastically heading into January largely
because of a sharp rise in demand led by pent-up domestic travelling during the Lunar New
Year holiday period, the world's biggest annual migration of people, for the first time in three
years.

Refinitiv Oil Research assessed China’s gasoline exports for the month of January at slightly
over 600,000 mt, while February outflows are projected at about 500,000 mt, with the total for
the two months well below the 1.91 million mt shipped out for December alone, and the total for
the year expected at just 7.56 million mt, down 40% from the 2022 total of 12.6 million mt.

Regional supply contracting in tandem with the sharp dip in China exports have been supportive
of price benchmarks. Reflecting this, Asia gasoline 92RON-Brent crack for January averaged at
$10.83/bbl, well above the December average at $2.75/bbl, while the gasoline 92R intermonth
spread widened to $1.14/bbl in backwardation for January, from a 6-cent/bbl backwardation the
previous month.

In view of China’s domestic demand for the motor fuel recovering further amid the expected rise
in business and social activities, outflows are likely to remain capped in the near term as
refiners will heed the government’s call to prioritise fuel supply for the domestic market.

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China will see the export of oil products as an avenue to boost GDP growth and this was clearly
reflected in the first tranche of oil export quotas for 2023, which is 46% higher versus the 13
million mt awarded in the same tranche last year.

However, its refiners have prioritised diesel exports over gasoline, given the much stronger
margins, and are expected to export 50% more diesel for 2023, at 16.4 million mt.

Gasoline’s upside will be capped by China’s aggressive goal of having electric vehicles account
for 20% of new car sales by 2025. The total number of new energy vehicles are projected to
surge to 31 million for the current year, up 40% from 22.3 million last year. Electric vehicle
penetration is to reach 33%, versus 26% from 2022, data from China Association of Automobile
Manufacturers (CAAM) showed, displacing around 8% of gasoline consumption.

Also, domestic gasoline production is expected to grow by some 6% on-year, suggesting that
there might be room for more gasoline exports further out.

Supply from India, other Northeast Asian exporters capped

India, despite never being a natural buyer of Russian seaborne crude grades with non-existent
imports prior to the invasion, has emerged as the biggest importer of Russia’s Urals grade, with
private-sector refiner Reliance being the largest off-taker.

Refinery operating rates have and should remain elevated as Indian refiners continue to pick up
discounted crude oil from Russia. Outflows of gasoline have edged higher at 1.09 million mt
monthly through 2022, compared with 1.05 million mt exported monthly the year before.

January outflows of finished gasoline, including alkylates lifted from Reliance’s plant in Sikka,
were assessed at 1.07 million mt, with cold weather in parts of the country impacting mobility.

More Indian barrels could eventually find their way to Asia, as competition for outlets intensifies
amid additional cargoes emerging from the Middle East, where more than 1.3 million barrels-
per-day (bpd) of new refining capacity are expected to come fully online by end of this year.

Supply is further boosted by Russian gasoline cargoes heading for storage in the Fujairah
trading hub, which will be re-exported.

South Korean exports were likewise on the rise last year as refiners sought to plug the gap
initially left by Chinese refiners before September 2022, with 1.02 million mt shipped out
monthly in 2022, well above the 2021 average of 886,000 mt. These barrels are usually Asia-
bound, with less than 10% of monthly volumes heading for the West.

January outflows were assessed at around the 1 million mt mark, with February volumes
forecast to contract amid a shorter month.

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Heavy turnaround schedules this year though could cap outflows going forward. Refiners GS
Caltex, SK Energy, S-Oil and Hyundai Oilbank will carry out maintenance shutdowns at their
respective crude distillation and gasoline-producing units through 2Q-3Q.

The country has also extended the consumption tax cut scheme to April 2023, which will boost
domestic consumption despite the discount being reduced from 37% to 25% under the latest
plan.

Over in Taiwan, private-sector refiner Formosa Petrochemical Corp (FPCC) similarly plans to
shut one of its three CDUs, one residue desulphurisation (RDS) unit and one residue catalytic
cracker (RCC) at its Mailiao refinery from March for scheduled maintenance, which should limit
gasoline exports during the turnaround period.

Australia and Indonesia imports on the rise as demand recovers

Australia continues to be a bright spot for Asia refiners, with the country’s imports of refined
fuels steadily rising after the pandemic battered refining margins in the country, accelerating the
permanent closures of several refineries.

Gasoline inflows to Australia climbed to an average of about 600,000 mt monthly in 2022, up

from slightly over 500,000 mt monthly the year before. The healthy import trend is expected to
continue into 2023 amid strong summer demand at the start of the year.

Singapore has emerged as one of Australia’s top gasoline suppliers post-pandemic, accounting
for about half of the total at an average of over 300,000 mt/month, up from the pre-pandemic
monthly average of less than 150,000 mt.

Indonesia, also Southeast Asia’s most populous country, has likewise lifted imports on the back
of robust demand post-COVID, with its 2022 intake expanding by more than 30% year-on-year
to a record-high of nearly 1.3 million mt/month. The country’s demand for 2023 is expected to
rise further to 1.4-1.5 million mt/month, but the upside could be capped by global recessionary
pressures.

Tighter regional supply to support market in near-to-medium term

Refinitiv Oil Research expects the Asian gasoline market to be stronger in 2023 barring
inflationary pressures, with tighter regional availability fundamentally supportive of the market at
least in the near-to-medium term, leading to the peak demand summer driving season in Q2.

Chinese exports are expected at lower-than-usual levels as domestic demand recovers, while
cargoes from several other producers across the region are likewise limited in the earlier half of
the year due to planned turnarounds.

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These supplies should remain region-bound, heading to demand centres such as Australia,
Indonesia and the Philippines, where demand is returning to pre-pandemic levels.

Gasoline requirements elsewhere across the globe are likewise on the rise with people
increasingly ready to take to the roads again. Pandemic travel restrictions have ceased, and
borders have re-opened amid a higher proportion of the global population being inoculated
against virus, with more than 5 billion worldwide receiving at least one dose of the COVID-19
vaccine as at Jan 31.

Source: Our World in Data

The strengthening of the RBOB-WTI prompt crack, averaging over $30/bbl since the start of the
month versus January’s $25.38/bbl, points toward signs of a potentially strong summer driving
season in the US.

Russia, despite the ongoing sanctions, is not a major exporter of the motor fuel, thus rendering
arbitrage gasoline supplies to Asia is unlikely, though some of the country’s naphtha has made
its way into the gasoline blending pool here.

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Oil Research Asia Contact List

Yaw Yan Chong

Director, Oil Research & Forecasts
Email: yan.yaw@lseg.com
Mobile: +65-90266729

Zameer Yusof
Senior Analyst, Middle Distillates
Zameer.Yusof@lseg.com

Krystal Chung
Senior Analyst, Light Distillates
Krystal.Chung@lseg.com

Charles Ong
Senior Analyst, Light Distillates
Charles.Ong@lseg.com

Chua Sok Peng

Lead Analyst, Petrochemicals
sokpeng.chua@lseg.com

Lee Ming Shane

Analyst, Petrochemicals
mingshane.lee@lseg.com

Amanda Zhao
Lead Analyst, China Oil
lei.zhao@lseg.com

Tobey Li
Senior Analyst, China Oil
tingting.li@lseg.com

Teo Su Ling
Senior Analyst, Fuel Oil
Suling.Teo@lseg.com

Emril Jamil
Senior Analyst, Crude & Fuel Oil
Emril.Jamil@lseg.com

Anh Pham
Senior Analyst, Crude Oil
QuangAnh.Pham@lseg.com

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