Asia Distillates-Markets volatile on supply concerns amid Russian ban

Asia’s middle distillates markets were volatile through the week as mixed demand-supply outlooks for October persisted, though gains were evident on Friday as a knee-jerk reaction amid tight supply worries in the West offset remaining market drivers.

Refining margins GO10SGCKMc1 for 10 ppm sulphur gasoil closed the week at $31.69 a barrel, down by around 5% week-on-week despite a late-week surge.

Meanwhile, spot cash premiums GO10-SIN-DIF firmed further reflecting price strength in the prompt markets. A buy-sell gap hindered serious discussions.

A potential decline in Russian exports for both September and October loading was a key contributor for the shorter Western supply, though the exact decreases have yet to be confirmed.

Analysts at JP Morgan and Citi expect the government export ban to last between a few weeks to six weeks, while some sources expect the pace of local wholesale price drops to be the key determinant.

Consequentially, the east-west arbitrage differential widened to $78 per metric ton on Friday from $72 a metric ton last week, reversing early week losses, and this in turn provided more support for the Asian market.

“The east-west spread reveals Europe’s robust distillate strength relative to East Asia. This disparity firmly directs the Middle East and west coast India barrels westward, aligning with Europe’s relatively higher need at present,” said Sparta Commodities analyst James Noel-Beswick.

Gasoil markets were choppy in the earlier half of the week, given mixed supply expectations from Asia for October loading.

South Korean refiners sold at least six more 300,000-barrel spot lots this week MDIS/TENDA and Kpler shiptracking data shows at least 100,000 tons of diesel are scheduled to be shipped out of China so far for October.

Commercial stockpiles in China are estimated still above 1.6 million tons, data compiled by China consultancy Longzhong showed, despite week on week declines. Levels were similar to a year ago, the data added.

Jet fuel refining margins JETSGCKMc1 fell by a slightly quicker pace week-on-week at more than 6%, as fresh export shipments to the U.S. West Coast were minimal despite the opened arbitrage window for Asian exporters.

Discounts on regrade JETREG10SGMc1 widened more than $2.50 a barrel as a result of the strength in gasoil swaps and almost unchanged jet fuel market fundamentals.

SINGAPORE CASH DEALS O/AS

– No gasoil or jet fuel deals.

INVENTORIES

– Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose by about 0.6% in the week to Thursday on higher imports, data from Dutch consultancy Insights Global showed.

NEWS

– U.S. oil refiners that cranked up processing this year amid soaring demand for gasoline and diesel are being hit by outages weighing on their ability to rebuild thin fuel stockpiles and helping drive up fuel prices.

– Rising oil prices are a concern for the Indian economy but its outlook remains bright after better September monsoons and a retreat in the prices of some key food items, the government said in its monthly economic report on Friday.
– Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global oil supply outweighed fears that further possible U.S. interest rate hikes could dent fuel demand, but they were still headed for a weekly loss in four.

– Russian oil pipeline company Transneft has stopped export shipments of diesel fuel from the Primorsk and Novorossiysk ports, the TASS news agency cited the company as saying on Friday.
Source: Reuters (Reporting by Trixie Yap; Editing by Varun H K)