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Asia Distillates-Gasoil cracks inch higher; near-term excess supply feared

Asian refining margins for 10 ppm gasoil edged higher on Monday, helped by weaker raw material crude prices, but traders were worried near-term demand would fall short of absorbing available supplies due to renewed coronavirus lockdowns in many places.

Refining margins, also known as cracks, for gasoil with 10-ppm sulphur content in Singapore were at $6.65 a barrel over Dubai crude during Asian trading hours, up from $6.54 a barrel on Thursday. The market was closed on Friday for Singapore elections.

The gasoil cracks are currently at their weakest levels for this time of the year on record, according to Refinitiv Eikon data that goes back to 2014.

The regional refiners have been ramping up output on expectations of firmer demand following the worst of the coronavirus crisis that would now add to the existing supplies in the market, trade sources said.

With arbitrage shipments not workable, most of the excess gasoil barrels would likely stay in the region, leading to a supply overhang, they added.

The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe, was around minus $8 per tonne on Monday, Refinitiv Eikon data showed.

Arbitrage is usually profitable when the EFS trades at about minus $15 a tonne or below, though it depends on other factors such as freight rates as well, according to traders.

India’s July gasoil exports are expected to close at about 1.9-2 million tonnes, up from 1.8 million tonnes in June, while gasoil exports from China this month are also expected to be higher than June’s 818,000 tonnes, Refinitiv oil research assessments showed.

Cash premiums for 10-ppm gasoil were at 67 cents a barrel to Singapore quotes on Monday, up from 58 cents on Thursday.

– One gasoil deal, no jet fuel trades

 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               48.49    -0.12      -0.25       48.61  GO-SIN
 GO 0.5 Diff                     -0.83     0.03      -3.49       -0.86  GO-SIN-DIF
 Spot Gas Oil 0.25%              49.13    -0.12      -0.24       49.25  GO25-SIN
 GO 0.25 Diff                    -0.19     0.03     -13.64       -0.22  GO25-SIN-DIF
 Spot Gas Oil 0.05%              49.82    -0.12      -0.24       49.94  GO005-SIN
 GO 0.05 Diff                     0.50     0.03       6.38        0.47  GO005-SIN-DIF
 Spot Gas Oil 0.001%             49.99    -0.06      -0.12       50.05  GO10-SIN
 GO 0.001 Diff                    0.67     0.09      15.52        0.58  GO10-SIN-DIF
 Spot Jet/Kero                   43.21    -0.12      -0.28       43.33  JET-SIN
 Jet/Kero Diff                   -0.34     0.00       0.00       -0.34  JET-SIN-DIF
 Brent M1                                                                               
 Gasoil M1                                                                              
 Gasoil M1/M2                                                                           
 Gasoil M2                                                                              
 Regrade M1                                                                             
 Regrade M2                                                                             
 Jet M1                                                                                 
 Jet M1/M2                                                                              
 Jet M2                                                                                 
 Gasoil 500ppm-Dubai                                                                    
 Cracks M1                                                              
 Gasoil 500ppm-Dubai                                                                    
 Cracks M2                                                              
 Jet Cracks M1                                                                          
 Jet Cracks M2                                                                          
 East-West M1                                                                           
 East-West M2                                                                           
 LGO M1                                                                                 
 LGO M1/M2                                                                              
 LGO M2                                                                                 
 Crack LGO-Brent M1                                                                     
 Crack LGO-Brent M2

Source: Reuters (Reporting by Koustav Samanta; Editing by Rashmi Aich)

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