Asia Distillates-Cracks slump to 2-week low on ample Asian supply worries

Asia’s 10 ppm sulphur gasoil margins gave back gains made in the last two weeks and fell to below $30 a barrel, weighed by worries of ample supply from China exporters being able to ease the tightness in the West.

The likelihood of sellers being able to sell up to 1 million metric tons of diesel monthly in the next four months was high if the quota allowance is at 12 million tons for refined fuels alone, two refiners said.

South Korean sellers were also in the mix this week, offering September loading parcels, putting downward pressure on cracks as well.

However, market positivity for the fourth quarter of this year remained – mitigating price weakness – given the myriad planned outages still expected. Furthermore, demand is likely to be supportive from the industrial and household sectors during autumn and winter in the northern hemisphere.

The diesel crack forward curve could continue to roll-up over the near term as inventories seem unlikely to rebound materially during fall maintenance, said BofA Global Commodity Research analyst Francisco Blanch in a client note.

Spot premiums for 10 ppm sulphur gasoil fell day-on-day to around $2.60 a barrel on thin buying interest and muted open-market activity, though gains were still logged for a second straight week.

Jet fuel refining margins fell almost at a similar pace as gasoil as expectations of a rebound in international air group travel from tourists exiting China died down slightly towards the end of the week.

Regrade widened slightly from a week earlier to around a discount of $1.25 a barrel.

SINGAPORE CASH DEALS O/AS

– No deal for gasoil or jet fuel.

INVENTORIES

– Crude oil inventories drew down by 10.6 million barrels last week, more than expected on the back of robust exports and sturdy demand from refineries, according to data from the Energy Information Administration.

– Middle distillates stocks held at key storage hub Singapore slipped by 7.5% week-on-week as robust jet fuel outflows outweighed a surge in gasoil total imports from regional sellers, official data showed on Thursday.

NEWS

– China’s manufacturing activity contracted for a fifth straight month in August, an official survey showed on Thursday, maintaining pressure on officials to provide support to shore up economic growth amid soft demand both at home and abroad.

– Oil prices eased on Thursday after data showed China’s manufacturing activity shrank for the fifth month in a row, and as investors cautiously awaited a U.S. personal consumption expenditure report later in the day for any clues on the interest rate outlook.

– China’s tepid economic growth and a possible extension of oil output cuts from top exporter Saudi Arabia are set to dominate discussions as global energy executives and officials gather next week at two major industry events in Singapore.

– China’s Sinopec Corp is setting up a new entity to invest in refinery and petrochemical assets overseas in a bid to leverage its expertise and deep pockets to expand globally as local Chinese oil demand nears a plateau.
Source: Reuters (Reporting by Trixie Yap)