Asian refining margins for 10ppm gasoil rose on Thursday to their strongest in eight weeks, while cash premiums for the transportation fuel-grade fell amid weaker deals in the physical market.
- Traders, however, remain upbeat about firmer near-term demand for marine gas oil (MGO) as the ship-owners switch to cleaner fuels to comply with the new International Maritime Organization (IMO) rules on sulphur emissions from ships.
- Refining margins, also known as cracks, for Gasoil with 10ppm sulphur content, rose to $16.18 per barrel over Dubai crude during Asian trading hours, a level not seen since November 7 and they were at $15.99 per barrel on Tuesday.
- Cracks for the benchmark Gasoil grade in Singapore, which have risen more than 6% in the last two weeks, are currently at their strongest levels for this time of the year in the last five years, Refinitiv Eikon data showed.
- Cash premiums for 10 ppm gasoil GO10-SIN-DIF dropped to 56 cents per barrel over Singapore quotes on Thursday, compared with a premium of 77 cents per barrel in the last trading session on Tuesday.
- Meanwhile, refining margins for jet fuel jumped to $15.09 per barrel over Dubai crude on Thursday, up from $14.56 a barrel on Tuesday.
- Cash premiums for jet fuel JET-SIN-DIF were at 29 cents per barrel to Singapore quotes on Thursday, compared with a premium of 26 cents per barrel on Tuesday.
IMO 2020 comes into effect
- Tougher rules on sulphur emissions from ships came into effect on Wednesday, in the biggest shake-up for the oil and shipping industries for decades. From Jan. 1, United Nations shipping agency the International Maritime Organization (IMO) has banned ships from using fuels with a sulphur content above 0.5%, compared with 3.5% earlier.
- Failure to comply with the global regulations will result in fines or vessels being detained and in some jurisdictions the risk of imprisonment, which could affect vital requirements such as insurance cover.
- Enforcement will be policed by flag and port states rather than the IMO and industry officials are still unsure about whether there will be full compliance when it kicks in.
- While major fuel bunkering ports such as Singapore, Fujairah in the United Arab Emirates and Rotterdam in the Netherlands have compliant-fuel supplies, analysts and shipping firms are still unclear what will happen at smaller ports given the need for ships to plan their sailing routes.
- As the global clean-fuel mandate takes effect, testing companies examining newer, low-sulfur marine blends acquired in Antwerp, Belgium, Houston and Singapore have found sediment at levels that could damage the engines of ocean-going vessels.
Singapore inventories
- Singapore onshore middle distillate stocks rose 2.8% to a two-week high of 10.8 million barrels in the week to Jan. 1, Enterprise Singapore data showed.
- Weekly middle distillate inventories averaged 11.1 million barrels in 2019, has averaged 9.6 million barrels a week in 2018, Reuters calculations showed.
- Overall, onshore middle distillate inventories were 4.7% lower year-on-year.
- Light distillate stocks dropped 1.07 million barrels to a four-week low of 11.6 million barrels in the week to Wednesday, while fuel oil stocks rose 236,000 barrels to a three-week high of 20.5 million barrels, Enterprise Singapore data showed.
Fujairah stocks
- Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 24.4% from a week earlier to 3.7 million barrels in the week to Dec. 30, data via S&P Global Platts showed.
- Stocks of middle distillates in the Fujairah oil hub have averaged 2.4 million barrels in 2019, Reuters calculations showed. This compares with a weekly average of 2.8 million barrels in 2018.
- Weekly Fujairah middle distillate stocks have more than doubled when compared with year-ago levels.
API inventory data
- U.S. crude oil stocks fell in the most recent week while gasoline inventories declined and distillate stocks rose, data from industry group the American Petroleum Institute showed on Tuesday.
- Crude inventories fell by 7.8 million barrels in the week to Dec. 27, to 436 million barrels, compared with analysts’ expectations for a draw of 3.2 million barrels.
- Distillate fuel inventories, which include diesel and heating oil, rose by 2.8 million barrels, compared with expectations for a 1.8 million-barrel gain, the data showed.
Other news
- Oil prices kicked off the new year higher on Thursday as warming trade relations between the United States and China eased demand concerns while rising tensions in the Middle East fuelled worries about supply.
- Oil prices are likely to hover around $63 a barrel next year, a Reuters poll showed on Tuesday, benefiting from deeper production cuts by OPEC and its allies, and hopes that a U.S.-China trade deal could jumpstart economic growth.
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Source: Reuters
