Asian middle distillate markets are entering the July 26-30 trading week on a steady-to-firmer note, with tightening gasoil supply balances shifting the sector toward firmer ground, while demand for jet fuel/kerosene continues to face headwinds amid a spike in COVID-19 cases in the region.
At 9:46 am Singapore time (0146 GMT), the ICE September Brent crude futures contract was up 51 cents/b (0.69%) at $74.05/b, from $73.54/b at the July 23 close.
Jet fuel/Kerosene
** Front-month August-September jet fuel/kerosene time spread was pegged at minus 14 cents/b at 0146 GMT July 26, steady from the Asian close on July 23, Platts data showed.
** The FOB Singapore jet fuel/kerosene cash differential ended the week at minus 9 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments on July 23, rising 33 cents/b week on week, Platts data showed.
** Much of the strength in the Asian jet fuel complex was underpinned by firmer demand and buying interest from Europe as the region geared up for the reopening of air travel as countries ease travel restrictions, industry sources said.
** In contrast, the situation in Asia remains bearish, as market participants noted that several countries around the region are plagued by rising COVID-19 cases, leading to stricter border controls and rigid travel restrictions, which weigh on jet fuel demand.
** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 44 cents/b over July 19-23, narrowing 8 cents/b from an average of plus 52 cents/b the week before.
Gasoil
** The August-September gasoil market structure was pegged at plus 12 cents/b at 0146 GMT July 26, inching down by a cent/b from the 0830 GMT Asian close on July 23, Platts data showed. The front month gasoil time spread has been steadily strengthening over the past week and is currently hovering at more than a six-week high.
** The August Exchange of Futures for Swaps, or EFS, spread was pegged at minus $7.00/mt at 0146 GMT July 26, widening from minus $6.87/mt at the July 23 Asian close, Platts data showed.
** The coming week may see the Asian gasoil market firming on a combination of tighter regional supply balances as well as more attractive economics to send Asian gasoil barrels West, traders said. Spot barrels from the major North Asian gasoil supply centers of Taiwan, South Korea, Japan and China are still seen hovering at less than normal volumes, with more Indian and Persian Gulf-origin gasoil volumes moving West on improving arbitrage economics, traders said. Still, some sources said patchy gasoil demand remains a concern, with several Asian countries reporting surging caseloads of coronavirus infections, which have been driven by more transmissible strains of the virus. This has resulted in extended and widening lockdowns across several countries, which may place a strain on gasoil consumption.
** The upward momentum in the Asian gasoil complex has been reflected in firming FOB Singapore 10 ppm sulfur gasoil cash differential. At the July 23 Asian close, the 10 ppm sulfur gasoil cash differential for cargoes loading from Singapore was assessed at plus 4 cents/b to the Mean of Platts Singapore gasoil assessments at the 0830 GMT close July 23, more than a five-week high.
** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 90 cents/b over July 19-23, narrowing 6 cents/ b from an average of plus 96 cents/b the week before.
Source: Platts