Asia Distillates-Gasoil cracks hit 2-week low on arbitrage, China supply uncertainty

Asia’s 10 ppm sulphur gasoil cracking margins declined for a second straight session to a two-week low of $27.50 a barrel, weighed by a continuous sell-off in the futures market, weaker arbitrage spreads and China supply uncertainty.

Decreases were attributed to weaker arbitrage differentials between Asia and northwest Europe, with the exchange of futures for swaps narrowing to a small discount of less than $70 a ton compared with more than $80 a ton a week ago. Seller margins to the West were lower than before as a result.

Trading activity turned brisk but the market was further weighed on by speculation of October-loading exports from China being higher than September volumes of around 1 million metric tons as rumors of a fourth batch of export quotas emerged.

Trade sources also mentioned a possible transference of 800,000 tons export quotas from marine fuel oil to refined oil products for the earlier third batch announced.

Cash differentials slipped by more than 10 cents, but decreases were cushioned by continuous buying interest for October spot lots in the open trading market.

Likewise, jet fuel refining margins fell around 8% – tracking weakness in the gasoil markets – amid some regional demand cautiousness given the slower growth in southeast Asia air passenger numbers for September both on a domestic and international front.

The wide arbitrage differential between Asia and the U.S. put a floor on price declines, with an additional 65,000 tons of jet fuel from northeast Asia headed to the U.S. West Coast for September, Kpler and LSEG shiptracking data showed.

Regrade still maintained steady for a second session at a discount of around $2.40 a barrel.

SINGAPORE CASH DEALS

– One gasoil deal, two jet fuel deals

INVENTORIES

– Analysts in a Reuters weekly poll estimate that U.S. stockpiles of gasoline were down by about 500,000 barrels last week, while distillate stockpiles, which include diesel and heating oil, were seen down by about 700,000 barrels.

NEWS

– The CEOs of top Saudi Arabian and U.S. oil producers Aramco 2222.SE and Exxon Mobil on Monday pushed back against forecasts that oil demand will peak, and said the transition to cleaner energy to fight climate change would require continuing investment in conventional oil and gas.

– Dutch tank storage company Vopak said on Tuesday it had reached an agreement with M&G Plc’s infrastructure equity investment arm Infracapital for the sale of its chemical terminals in Rotterdam.

– Oil prices rose on Tuesday for a fourth consecutive session as weak U.S. shale output spurred further concerns about a supply deficit stemming from extended production cuts by Saudi Arabia and Russia.
Source: Reuters (Reporting by Trixie Yap)