Asia Distillates-Gasoil margins, premiums up for 5th week despite Friday weakness

Asia’s 10-ppm sulphur gasoil margins and spot premiums posted a fifth consecutive week of gains, fuelled by robust prompt demand for physical lots and continuously firm ICE gasoil futures, though mixed expectations on regional supplies halted day-on-day gains on Friday.

Refining margins closed the trading session at $30.74 a barrel, up by around 15% from a week ago, while cash premiums inched up 3 cents week-on-week at $1.94 a barrel.

Buying predominantly came from the open market trading sessions, with two major trading houses seeking prompt loading gasoil presumably to cover their contractual shortfalls in some regions – given the lack of a spot arbitrage to the West for now and tepid regional demand from end-users.

More sellers emerged in the late week to cash in on the lucrative margins, since prices were at a six-month high, slowing down overall gains on Friday. South Korean refiners joined in the mix, offering prompt and September parcels to cash in on the market’s steep backwardation structure.

Regrade, however, was steady at a discount of $2.50 a barrel, as gasoil swaps continued to outperform jet fuel. Jet fuel continues to lack a clear demand-supply directio, given the thin liquidity, although major markets in the West are seeing a positive regrade spread, one trader said.

SINGAPORE CASH DEALS

– Two gasoil deals, no jet fuel deals.

INVENTORIES

– Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose for a third consecutive week to 2.12 million metric tons, data from Dutch consultancy Insights Global showed on Thursday.

NEWS

– Pipeline operator Magellan Midstream Partners MMP.N said on Thursday it expects exports of U.S. crude and refined products to grow on increasing global demand for U.S. energy.

– The United States will continue to work with producers and consumers to ensure the energy market promotes growth after Saudi Arabia’s decision to reduce oil production, White House national security spokesman John Kirby told a briefing on Thursday.

– New orders for U.S.-made goods surged in June, boosted by strong demand for transportation equipment and other goods, showing some pockets of strength in manufacturing despite higher interest rates.

– Oil prices rose for a second day on Friday, set for their sixth week of gains, after Saudi Arabia and Russia, the world’s second and third-largest crude producers, pledged to cut output through next month.
Source: Reuters (Reporting by Trixie Yap; Editing by Krishna Chandra Eluri)