- Asian middle distillate markets were poised to remain steady in the Aug. 23-27 trading week.
- As reduced supply provided price support for the gasoil sector while strong buying interest from the West set a floor for jet fuel prices.
- At 10 am Singapore time (0200 GMT), the ICE October Brent crude futures contract was up 72 cents/b (1.1%) from the Aug. 20 close at $65.18/b.
A recent news article published in the Platts by Su Yeen Cheong, Amy Tan and Clarice Chiam talks about Asia middle distillates and Key market indicators for Aug 23-27.
Jet fuel/kerosene
Brokers pegged the front month September-October jet fuel/kerosene spread at minus 5 cents/b at 0200 GMT Aug. 23, widening slightly from minus 4 cents/b at the 0830 GMT Asian close Aug. 20, S&P Global Platts data showed.
Strong buying interest from the US and Europe propelled the FOB Singapore jet fuel/kerosene cash differential into positive territory over Aug. 16-20. The cash differential was assessed at plus 4 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment Aug. 20, up 10 cents/b week on week, Platts data showed.
That said, airlines in Asia’s aviation hubs have seen little respite in terms of demand in recent months as the resurgence of COVID-19 prompts re-implemented or extended border closures, according to traffic reports released by major airlines in the region in the week to Aug. 20. Major regional airlines including Singapore Airlines and Cathay Pacific reported substantial reductions in capacity and air passenger traffic in July compared with pre-pandemic levels.
The prolonged dire conditions in the aviation sector weighed on the Singapore front month jet fuel/kerosene crack against Dubai crude swap. The spread, which measures the product’s relative strength to crude, fell 7 cents/b day on day to a near two-month low at $5.29/b Aug.18 before recouping some of its losses to end the trading week at $5.49/b Aug. 20, Platts data showed.
The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 4 cents/b over Aug. 16-20, narrowing 6 cents/b from plus 10 cents/b the week before.
Gasoil
The September/October gasoil market structure was pegged at plus 17 cents/b at 0200 GMT Aug. 23, widening from the plus 15 cents/b assessed at the 0830 GMT Asian close Aug. 20, Platts data showed.
The September Exchange of Futures for Swaps or EFS spread was pegged at minus $10.17/mt at 0200 GMT Aug. 23, widening from minus $9.43/mt at the Aug. 20 Asian close, Platts data showed.
The week ahead will likely see the ultra-low sulfur gasoil market remaining steady amid tighter regional supply, but more downside was expected for the medium sulfur or 500 ppm sulfur gasoil market. Traders said demand for the latter has been weak amid a worsening COVID-19 crisis across Southeast Asia driven by the fast-moving delta variant, while supply has been plentiful due to an increase in output from refiners. At the Asian close Aug. 20, the FOB Singapore price spread between 10 ppm sulfur and 500 ppm sulfur gasoil was hovering at a 16-month high of $3.30/b.
Singapore’s middle distillate inventories dipped to a 19-month low Aug. 18, reversing gains seen in the previous two weeks as tightening regional supply capped inflows. Gasoil, jet fuel and kerosene stocks fell 536,000 barrels or 4.8% week on week to 10.64 million barrels over Aug. 12-18, Enterprise Singapore data showed. Lower-than-usual gasoil supply, especially from China, has tightened regional balances, while an open arbitrage window to send Asian gasoil barrels to the West has lent further support.
The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 61 cents/b over Aug. 16-20, narrowing 9 cents/b from plus 70 cents/b the week before.
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Source: Platts
