The reforming margin for 95-octane gasoline widened almost to the point of profitability over the past few weeks due mainly to two large unexpected gasoline purchases from Indonesia.

Indonesia purchased 840,000 barrels of 92-octane unleaded for February lifting by tender from a Japanese trader and a Dutch trader at around 20 to 30 cents per barrel premium to Singapore spot prices, traders said.

Indonesia previously purchased 840,000 barrels for January lifting at a premium of only 10 cents per barrel, mainly from the Dutch trader, market sources said. The increase in the February premium and the widening of the reforming margin were due mainly to the stronger sentiment created by Indonesian demand.

"They (Indonesia) are responsible for the increase in their own premium", one trader said referring to the higher February premium paid by Indonesia after a market price rise was fuelled by its January tender.

The reforming margin started to rise in December from around flat to peak late last week at around $2.70 per barrel, or just short of the $3.00 profitability benchmark used in Asia.

In addition to Indonesian requirements, Vietnamese and Australian demand picked up, but neither had the market impact of Indonesian demand, traders said.

Vietnam purchased only three of 10 cargoes of the 83-octane leaded gasoline cargoes it required for the first quarter by tender and purchased the rest from China.

Australian driving season demand was seen mopping up some excess inventories among the majors, but had very little effect on the overall spot market.

"I think there may be limited upside unless we find some more demand", a trader with a Singapore company said. Overall, Asian demand had been crippled by the effects of the Asian economic crisis.

Less demand had also been compounded by over-capacity from the building of refineries in the early 1990s, based on Asia's double digit growth.

Traders said that most Asian reformers were running at under capacity, but operating rates were very inflexible because gasoline was produced as a by-product to hydrogen, needed for the operation of downstream facilities.

A December report from the Singapore unit of New York brokers and consultants Poten and Partners, said the Asian motor fuel (gasoline and diesel) markets had only ended the first of many more dismal years to come.

In the short term, unless Indonesia another large shipment, traders said they expected to see the reforming margin narrow back to December levels over the next month.