Asian middle distillate markets are entering the July 19-23 trading week on a steady-to-firmer note, with tighter supply balances lending support to the gasoil sector while a resurgence in COVID-19 in Asia continues to weigh on jet fuel/kerosene demand says a news article on Platts.
At 10:00 am Singapore time (0200 GMT), the ICE August Brent crude futures contract was down $1.14/b (1.55%) at $72.45/b, from $73.59/b at the July 16 close.
JET FUEL/KEROSENE
- Front-month August-September jet fuel/kerosene time spread was pegged at minus 22 cents/b at 0200 GMT July 19, narrowing 3 cents/b from the Asian close on July 16, S&P Global Platts data showed.
- The FOB Singapore jet fuel/kerosene cash differential extended declines and ended the week at minus 42 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments on July 16, falling 4 cents/b weeks on the week, Platts data showed.
- Asia’s aviation sector continues to brace against tough headwinds as the spike of COVID-19 infections in the region dims travel outlook, prompting lockdowns across many countries.
- The bearish situation was also seen in Japan, where industry sources said the COVID-19 state of emergency measures in Tokyo would have a significant impact on jet fuel demand for summer travel.
“Domestic travel demand usually sees an uplift during the peak summer travel season in Japan; however, Japan just announced a state of emergency in the greater Tokyo area due to rising COVID-19 cases, and the new measure will have a big impact on domestic travel as 10% of the population of Japan resides in Tokyo,” a source with a Japanese airline said, adding that flight capacity in Japan will likely remain low, with little upside before 2022.
- The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 52 cents/b over July 12-16, widening 14 cents/b from an average of plus 38 cents/b the week before.
GASOIL
- The August-September Gasoil market structure was pegged at plus 7 cents/b at 0200 GMT July 19, steady from the 0830 GMT Asian close on July 16, Platts data showed.
- In the July Exchange of Futures for Swaps or EFS, the spread was pegged at minus $6.00/mt at 0200 GMT July 19, narrowing from minus $6.24/mt at the July 16 Asian close, Platts data showed.
- The Asian gasoil market may see a measure of support this week, with some traders saying that the complex could be shifting to the firmer ground on a combination of factors.
“There are expectations that it’s going to be a tighter market for gasoil going forward. We have news that the Chinese have very low export volumes [of gasoil], Japan’s exports are also lower, [South Korea’s] GS Caltex has so far only shown two spot cargoes of gasoil for August loading and the Taiwanese have not shown any spot cargoes yet,” a trader said, adding that while demand is not strong, at the same time “there are also not a lot of molecules being seen in the physical pool.”
- In addition, a marginally open arbitrage to send Asian Gasoil barrels to the West may lend further support to the market. The front-month Exchange of Futures for Swaps, or EFS spread, is currently at the lowest it has been in a month, and this, together with lower freight rates, could help open East-West arbitrage lanes which have been closed for an extended period of time.
- The Q4 2021-Q1 2022 Gasoil swap spread — an indication of near-term sentiment — averaged plus 96 cents/b over July 12-16, widening 4 cents/b from the 92 cents/b average the week before.
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Source: Platts
