Asia Distillates-Margins hit one-year low as ample supplies weigh

Asia’s middle distillates markets remained soft, with refining margins GO10SGCKMc1 hitting below the $14 a barrel level for the first time in slightly more than a year as ample supplies remained a key bearish factor.
Talks of more India-origin and Middle East-origin cargoes heading to Asia for May continued to weigh on overall discussion levels, though uncertainty on China-origin exports were still prevalent.
Chinese refiners will likely focus their production yield on middle distillates still, several trade sources said.
Some analysts expect regional demand to remain slightly better given some stockpiling amid the refinery maintenance period until early June and that could balance out the rising supplies.
The rare emergence of Iraq’s SOMO seeking to sell higher-sulphur gasoil came as a surprise to some traders, but volumes may not be floated to Asia given the specifications of the cargo, some sources said.
Cash differentials GO10-SIN-DIF were little changed and remaining at discounts nearing 20 cents a barrel as a buy-sell gap hindered further negotiations and deals.
On the jet fuel front, sale tenders were slightly fewer but at least two Chinese refiners had plans to engage in sale discussions soon.
Demand fundamentals could improve soon from Japan because of the maintenance season, which could buoy markets further, one refinery source said, adding that at least 1-2 cargoes from South Korean refiners sold for June will likely be headed there.
Regrade JETREG10SGMc1 narrowed further to a discount of around $1.44 a barrel amid the weakness in gasoil paper markets.
SINGAPORE CASH DEALS
– One 500ppm gasoil deal, no jet fuel deal
INVENTORIES
– U.S. crude oil inventories rose unexpectedly last week due to a big adjustment for unaccounted barrels, while gasoline stockpiles fell as demand grew ahead of the summer driving season, the Energy Information Administration said on Wednesday.
– Middle distillates inventories held at Fujairah Oil Industry Zone surged back to a one-month high of 3.705 million barrels in the week ended May 20, according to industry information service S&P Global Commodity Insights.
– Singapore’s middle distilates stockpiles surged back to a two-week high, nearing almost 11 million barrels, as a decline in jet fuel/kerosene net exports offset a rise in diesel/gasoil net exports, official data showed on Thursday.
NEWS
– India and Egypt were the top destinations for Russian seaborne fuel oil and vacuum gasoil (VGO) exports in April, traders said and LSEG data showed.
– Indian refiners’ use of crude oil vessels to ship refined fuels such as diesel to key European markets has diminished in May after volumes neared two-year high levels last month, trade sources and analysts said.
Source: Reuters (Reporting by Trixie Yap; Editing by Devika Syamnath)