Singapore — Asian middle distillates is expected to diverge in the week ahead as the jet fuel/kerosene market is seen gaining ground on firm pre-winter kerosene demand, while the gasoil market remains challenged by still slow demand and high inventories.
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Register NowICE November Brent crude futures fell 38 cents/b on the day to $41.72/b at 0300 GMT Sept. 28, from $42.10/b at the 0830 GMT Asian close on Sept. 25.
JET FUEL/KEROSENE
** The front month October-November Singapore jet fuel timespread surged over the past week, albeit still in a contango, and was pegged at minus 54 cents/b at 0300 GMT Sept. 28, narrowing 3 cents/b from minus 57 cents/b at the 0830 GMT Asian close on Sept. 25.
** The Asian jet fuel/kerosene outlook for the region's aviation sector gained some footing and is expected to firm up further in the week amid heightened demand for heating kerosene, ahead of the peak winter season.
** Industry sources added that the shortage in jet fuel/kerosene supply as a result of its negative cracking margin could deter producers from increasing jet fuel/kerosene production, leading to further shortages and increased prices in the weeks to come. At the 0830 GMT Asian close, the FOB Singapore jet fuel/kerosene cracking margin against the front month cash Dubai remained in negative territory of minus $1.03/b, posting a 61 cents/b, or 37.20%, jump day on day, Platts data showed
** That said, the jet fuel/kerosene complex was still bogged down by tepid air travel demand, led by demand destruction from the resurgence of the coronavirus pandemic. According to data from the Association of Asia Pacific Airlines on Sept. 24, Asia-Pacific airlines carried only 1 million international passengers in August, or just 3% of the 34 million passengers carried in the same month of 2019.
** S&P Global Platts Analytics reported on Sept. 25 that the incentive to ship jet fuel, basis LR2 vessels, from the Arab Gulf region to Northwest Europe remains volatile, but appears to be closed by about 50 cents/b. Platts Analytics added that the spot arbitrage between South Korea and the US West Coast has been narrowing in September, and estimated that the incentive is down to 50 cents/b from the August average of $3.20/b.
GASOIL
** The front month October-November gasoil market structure was valued at a contango of 53 cents/b at 0300 GMT Sept. 28, narrowing 4 cents/b from the minus 57 cents/b assessed at the 0830 GMT close on Sept. 25, Platts data showed.
** The November Exchange of Futures for Swaps spread was pegged at plus $2.75/mt at 0300 GMT Sept. 28, down from plus $2.96/mt at the Sept. 25 Asian close.
**Market participants said the gasoil market seemed to be trending towards a more balanced outlook, with lower regional refinery run rates reducing production, while some pockets of demand still remained, but said that the overall Asian gasoil market continued to be weighed down by high inventories.
** This was evidenced by another gain in Singapore's commercial onshore middle distillate stocks, with latest data from Enterprise Singapore showing that inventories rose 2.63% week on week to 15.66 million barrels for the period Sept. 17-23.
** The front month Singapore 10 ppm sulfur gasoil swap spread against the Dubai crude swap is currently hovering at historical lows, underscoring the weakness in the market. At the Asian close on Sept. 25, the crack was assessed at $2.16/b, edging up 15 cents/b from the 32-month low of $2.01/b on Sept. 24.
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September 28, 2020 at 11:41AM
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Asia middle distillates - Key market indicators this week - S&P Global
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