Key Factors Expected to Weigh on Asian Middle Distillates This Week

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The Asian middle distillate complex in the week starting May 24 will continue to face pressure from lackluster demand amid a resurgence in COVID-19 cases, says news insights from Platts.

While leaner supplies will likely continue to provide support for the Asian gasoil market, the rise in COVID-19 transmissions cast doubts as to whether the demand momentum can be sustained. Meanwhile, the jet fuel/kerosene sector continues to see demand stifled by movement restrictions imposed to curb the spread of the pandemic.

The Details of the Report are Enclosed as Follows.

Jet fuel/Kerosene

At 0255 GMT May 24, the front-month June-July jet fuel/kerosene time spread widened 1 cent/b on the day to be pegged at minus 21 cents/b, Platts data showed.

The FOB Singapore jet fuel/kerosene cash differential extended further declines in the week amid headwinds in the regional aviation sector. The cash differential flipped into a discount on May 18 and was assessed at minus 23 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments on May 21, marking a 48 cents/b decline on the week, Platts data showed.

In China, jet fuel output jumped 62.6% on the year to 3.94 million mt in April, latest data from the National Bureau of Statistics showed. According to a report by the aviation data and analytics company, Simple Flying, in late April, the number of domestic flights operated has exceeded both 2020 and 2019 levels, adding that China’s domestic flights are trending above 12,500 flights a day.

Singapore was a net exporter of aviation fuels and kerosene in the week ended May 19, with outflows registered at 55,733 mt as compared to imports of only 0.08 mt for the week of May 13-19.

The Q3-Q4 jet fuel/kerosene swap spread — an indication of near-term sentiment — averaged minus 17 cents/b May 17-21, which was unchanged from the previous week.

Gasoil

At 0255 GMT May 24, the front-month June-July gasoil market structure was pegged at plus 11 cents/b, steady from the assessed value at the Asian close on May 21, Platts data showed.

The front-month June-July Exchange of Futures for Swaps, or EFS, the spread was pegged at minus $3.63/mt at 0255 GMT May 24, narrowing slightly from the May 21 assessment of minus $3.71/mt, Platts data showed.

Asian gasoil traders said the week ahead may be bumpy for the middle distillate, amid divergent views over the current state of the market. On the one hand, leaner regional supplies — owing to turnarounds as well as less gasoil exports from China — have worked to shore up sentiment for gasoil, while on the other, slowing regional requirements as a result of tightening restrictions to break the current wave of coronavirus infections have raised demand concerns.

Market participants are also looking closely at South Korea’s gasoil exports following China’s announcement that it will be implementing a consumption tax on the import of light cycle oil from June 12. South Korea is the largest supplier of light cycle oil to China, and some sources said the latest development will likely lead to the North Asian country having to pivot away from LCO production and shift towards gasoil production instead.

The Q3-Q4 gasoil swap spread — an indication of near-term sentiment — averaged plus 52 cents/b May 17-21, widening 19 cents/b the previous week’s average of plus 33 cents/b.

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Source: Platts

 

 

 

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