Asia Distillates-Thin spot activity persists; China’s Dec exports in focus

Asia’s middle distillates market recorded thin spot market activity overall but a spot physical deal for 10 ppm sulphur gasoil emerged for the first time in three weeks, with mixed expectations on China’s export volumes for December back in focus.

While export estimates from some China consultancies showed about 450,000 metric tons for December, some traders still expect the volume to rise further to around 600,000 tons if the tarnsference of quotas from marine fuel to light products happen.

The market’s cash differentials slipped into a deeper discount of 38 cents a barrel, with a closed east-west arbitrage window adding on to downside pressures and several lower-priced sellers readily availabile.

Refining margins for 10 ppm sulphur gasoil fell by almost 2% from the previous trading session.

Jet fuel refining margins were supported by an opened arbitrage window between Asia and the U.S. West Coast and a positive regrade structure in northwest Europe.

Regrade traded at a premium for the second consecutive session, hitting a 10-month high, reflecting both the weakness in gasoil and strength in jet fuel in comparison.

Some refiners are likely switching to more kerosene production soon in December, given the lucrative margins for the heating and aviation fuel compared with gasoil, two traders said.

At least one cargo has been fixed for export from north China to the U.S. West Coast, Kpler shiptracking data showed.

SINGAPORE CASH DEALS

– One 10 ppm sulphur gasoil deal, no jet fuel deal.

REFINERY NEWS

– South Korea’s SK Energy, owned by SK Innovation 096770.KS, is likely to bring back online one of its crude distillation units (CDU) by mid-December after shutting it for repairs last week, three sources familiar with the matter said on Monday.

NEWS

– China has issued an additional 3 million metric tons in fuel oil import quotas in 2023 for non-state firms, according to a notice released by the country’s Ministry of Commerce on Monday.

– Profits at China’s industrial firms extended gains for a third month in October, albeit at a slower pace, suggesting more policy support from Beijing is needed to help shore up growth in the world’s second-largest economy.

– Oil prices slipped on Monday, with Brent falling toward $80 a barrel, as investors awaited the OPEC+ meeting later this week for an agreement to curb supplies into 2024.
Source: Reuters (Reporting by Trixie Yap; Editing by Mrigank Dhaniwala)