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Asia Distillates-Jet fuel cash differentials climb to strongest in nearly 6 weeks

Asia’s cash differentials for jet fuel gained for a fourth consecutive session on Tuesday, to their smallest discounts in more than a month, helped by a pick up in buying interests in the physical market over the last week.

Cash discounts for jet fuel JET-SIN-DIF were at 50 cents a barrel to Singapore quotes on Tuesday, a level not seen since Aug. 26. The spot differentials were at a discount of 69 cents per barrel a day earlier.

Refining margins, also known as cracks, for jet fuel in Singapore jumped to their highest in over two months, rising 66 cents on Tuesday to trade at $2.08 per barrel over Dubai crude during Asian trading hours.

The jet profit margins have found support as run cuts at regional refineries helped drain out excess supplies, while Japan and South Korea have started stockpiling kerosene ahead of winter, when the fuel is used for residential heating.

Winter months usually prop up jet fuel refining margins as kerosene belongs to the same grade of oil products, with jet margins determining the profitability of both.

But with thousands of flights still grounded due to coronavirus restrictions, the persistent weakness in Asia’s aviation market is expected to outweigh the demand boost from the uptick in seasonal kerosene consumption, industry analysts said.

“Jet/kero margins will likely receive a small boost from winter residential heating demand in Northeast Asia… (But) it is a marginal boost, maybe just $1 per barrel in terms of the crack,” JBC energy market analyst Philip Jones-Lux said.

Until the global air fleet takes flight again in serious numbers, the overall outlook for jet fuel will remain pessimistic, traders and analysts said.

SINGAPORE CASH DEALS

– Two jet fuel trades, two gasoil deals

OTHER NEWS
– Oil prices gained on Tuesday due to fears that refineries could be hit by a storm brewing in the Gulf of Mexico, while buyers also drew relief from U.S. President Donald Trump’s return to the White House after being treated for COVID-19 in hospital.

 ASSESSMENTS
 MID-DISTILLATES                                                                         
 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                42.75     1.32       3.19       41.43  GO-SIN
 GO 0.5 Diff                      -1.96    -0.06       3.16       -1.90  GO-SIN-DIF
 Spot Gas Oil 0.25%               43.15     1.32       3.16       41.83  GO25-SIN
 GO 0.25 Diff                     -1.56    -0.06       4.00       -1.50  GO25-SIN-DIF
 Spot Gas Oil 0.05%               43.57     1.32       3.12       42.25  GO005-SIN
 GO 0.05 Diff                     -1.14    -0.06       5.56       -1.08  GO005-SIN-DIF
 Spot Gas Oil 0.001%              44.16     1.45       3.39       42.71  GO10-SIN
 GO 0.001 Diff                    -0.56     0.05      -8.20       -0.61  GO10-SIN-DIF
 Spot Jet/Kero                    42.35     2.16       5.37       40.19  JET-SIN
 Jet/Kero Diff                    -0.50     0.19     -27.54       -0.69  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 Ramakrishnan M.)

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