Asia gasoline cracks slide as BP turns seller

SINGAPORE, April 28 - Asia gasoline cracks fell to the lowest in 1-½ months on Tuesday, as BP turned into an active seller after a buying binge, traders said.

The spread could drop further on waning Indonesian and Australian demand, while supplies rise as refiners return from maintenance by end-June, they added.

Hopes of arbitrage flows to the United States have also diminished, as the imapct of the recession is worsened by fears of a widening swine flu outbreak that could keep Americans at home during the holidays, further cutting gasoline demand that has been declining since 2007.

Crack spreads -- premiums/losses from refining Brent crude into gasoline -- fell to plus $3.40 a barrel after the buying boost from two oil majors ended, but might not yet flip to discount levels this week as support is still provided by lower Chinese exports and refinery shutdowns.

For graphic on gasoline cracks, click on: http://graphics.thomsonreuters.com/apr09/AS_GSCRK0409.jpg

The crack was hovering above $8.00 premium between April 8 and April 22, better than the average premium of $6.20 in March, because BP and Shell snapped up a total of 2.15 million barrels.

But it lagged the highs of $16.75 premium on Feb. 13, when Indonesian demand sparked by an outage led to a rally that dragged cracks off a low of minus $3.07 on Jan. 7.

"The two majors were basically holding up the market previously," said a trader.

BP has stopped its buying spree after taking 1.5 million barrels of 92 and 95 octane gasoline for March and April from the Singapore cash market at high premiums, most of which traders said would go to the Middle East.

In turn, it has sold 300,000 barrels of both grades for May lifting since last Wednesday. Shell was mending a supply dent caused by an outage at a 33,000 barrels per day (bpd) gasoline-making unit in Singapore since early April, but is expected to buy less after restarting the Long Residue Catalytic Cracker (LRCC) on Monday. So far, Shell has bought some 150,000 barrels for May lifting.

NO WESTERN RESCUE SEEN

"The bright spot right now (for sellers) are the lower supplies in Asia caused by refinery turnarounds and lower-than-expected exports from China," the same source said.

China exported 122,151 tonnes of gasoline in March, less than half the volume shipped out in February, official data showed. But with the heavy spring maintenance due to end by late-June and Asia's top gasoline importer Indonesia keeping its imports under wraps, the market looked bearish going forward.

Indonesia's state-run Pertamina had aimed to buy 5.6 million barrels of gasoline for April to help raise its gasoline stocks to 20 days of consumption, from 18 days. But whatever purchases it had made so far after almost a month had hardly been seen via spot tenders and its April target is not expected to be met.

"Our target for gasoline is still for 20 days. By the end of April, the stock will still be around 18 days of consumption," said a Pertamina official who declined to be named.

"We expect the stock level to be higher in May. For that, Pertamina may seek more gasoline imports," he added.

But its June imports are expected to fall to 4.8 million barrels..

No support is expected either from the U.S. driving season between June and August this year.

Even supplies from Europe -- traditional suppliers to the world's top gasoline consumer -- will not be attractive with exports falling 15 percent in March, as lower premiums on U.S. RBOB gasoline versus European gasoline this year curbing arbitrage flows..

"The East-West arbitrage window has also collapsed since last week," said the same Northeast Asian trader.

Many traders doubted that tankers "Dai Minh" booked by Trafigura for end-April lifting from Taiwan to the U.S. Gulf Coast, and the "Torm Lotte" booked by Vitol to April 24 loading from South Korea to the same destination are carrying gasoline.

"It's simply unworkable," said a Singapore-based trader.

Last September, at least 90,000 tonnes of South Korean gasoline were shipped to the West, including Mexico, but that came after Hurricane Gustav hit supplies in the Gulf Coast. Mexico takes most of its supplies from the U.S. Gulf.

"But Mexicans are now staying indoors because of the swine flu. It's like SARS in Asia. It affects mobility, which leads to less gasoline consumption," said a trader.

Traders also pointed to the incremental supplies from Reliance, whose new 580,000 barrels per day refinery in Jamnagar, can produce a 30,000 tonnes per day. Strong Iranian demand has so far pulled in some of these barrels..

"But who knows what will happen from June. Reliance could start pouring barrels into the Asian market, if other outlets offer limited opportunites," said another Singapore-based trader.