Asia Middle Distillates: Key Market Indicators for March 14-18

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The concerns over supply uncertainty amid the escalating Russia-Ukraine conflict will continue to take center stage in the Asian middle distillates market in the March 14-18 week, keeping gasoil and jet fuel/kerosene prices elevated.

At 10:00 am Singapore time (0200 GMT), the front-month May ICE Brent crude oil futures contract was at $109.62/b, down $1.67/b (1.50%) from the Asian close of $111.29/b March 11, says an article published in Platts.

Jet fuel/Kerosene

Traders said tight availability of jet fuel cargoes will continue to lend support to the complex, with little respite seen in the short term. A weak regrade spread as well as upcoming regional refinery turnarounds may likely keep jet fuel length curtailed for the moment, sources said.

Brokers pegged balance-month March-April jet fuel/kerosene time spread at plus $4/b at 0200 GMT on March 14, narrowing 50 cents/b from plus $4.50/b at the Asian close on March 11, S&P Global Commodity Insights data showed.

The FOB Singapore jet fuel/kerosene cash differential was assessed at plus $4.05/b to Mean of Platts Singapore jet fuel/kerosene assessments at the close March 11, rising $1.70/b, or 72.34% week on week, S&P Global data showed.

The Japanese government more than tripled fuel subsidies to Yen 17.7, or 15 cents, per liter over March 10-16, from Yen 5/liter a week ago, in a bid to curb rising oil products’ retail prices. Kerosene retail prices were up Yen 1.5/liter at Yen 114.4/liter, increasing for the ninth consecutive week.

The Q2-Q3 jet fuel/kerosene swap spread averaged plus $13.49/b over March 7-11, almost doubling from plus $7.34/b the week before.

Gasoil

The Asian gasoil complex is expected to likely to be priced competitively against the well-supported levels in the European pricing center to keep sufficient barrels within the region to meet steady Asian demand. Arbitrage viability to bring Asian gasoil barrels to the West continues to evolve dynamically, with a steep backwardation and expensive freight disincentivizing arbitrage, while a deeply negative gasoil EFS spread promotes East-West arbitrage flows.

Brokers pegged balance-month March-April Singapore gasoil at plus $6.74/b at 0200 GMT March 14, widening 56 cents/b from plus $6.18/b at the Asian close 0830 GMT March 11.

The April EFS spread was pegged at minus $67/mt at 0200 GMT on March 14, widening $5.24/mt from minus $61.76/mt at the close March 11.

Singapore’s commercial middle distillate stockpiles were largely stable in the week of March 3-9, with inventories staying below the 8 million-barrel mark for the fifth consecutive week at 7.93 million barrels, Enterprise Singapore data released late March 10 showed. Singapore flipped to a net gasoil importer for the week ended March 9, as strong flat prices of gasoil stifled buying appetite from key importing regions in the East.

The Q2-Q3 gasoil swap spread averaged plus $16.95/b March 7-11, widening from plus $9.75/b the week before.

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Source: Platts

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