Asia middle distillates: Key market indicators for Oct 11-15
Asian middle distillate markets kicked off the Oct. 11-15 trading week on a firm footing as limited supply buoys market sentiment for gasoil and jet fuel/kerosene.
At 11:00 am Singapore time (0300 GMT), the ICE December Brent crude oil futures contract was up $1.11/b (1.35%) from the Oct. 8 Asian close at $83.50/b.
Brokers pegged balance October-November jet fuel/kerosene time spread at parity at 0300 GMT Oct. 11, narrowing from minus 6 cents/b at the 0830 GMT Asian close Oct. 8, Platts data showed.
The FOB Singapore jet fuel/kerosene cash differential was assessed at plus 14 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Oct. 8, up 21 cents/b from the start of the week, Platts data showed.
The near-term outlook remains mixed. Traders said near term demand seen robust due to overall travel optimism from the US and Europe likely to provide support and encourage cross-regional flows from Asia to the West of Suez. Other sources said regional demand remain in the doldrums as many countries, especially in the Southeast Asian region, were still struggling to contain the coronavirus pandemic.
Industry sources remain cautious over additional support expected to arrive from Northeast Asia in Q4 with Japan starting its seasonal stockpiling of kerosene ahead of winter. Traders said currently seeing an uptick in Japan domestic demand for kerosene, but do not expect impact of pre-winter kerosene imports to be felt before November due to milder temperatures in Northeast Asia.
The Q1 2022-Q2 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus $1.90/b over Oct. 4-8, up from plus $1.04/b the week before.
Balance October-November gasoil market structure pegged at plus 50 cents/b at 0300 GMT Oct. 11, steady from 0830 GMT Asian close Oct. 8, Platts data showed.
The October Exchange of Futures for Swaps spread was pegged at minus $11.15/mt at 0300 GMT Oct. 11, widening from minus $10.40/mt at the Oct. 8 Asian close, Platts data showed.
Traders said Asian gasoil complex remains supported in the week ahead, on the back of firm sentiment driven by tighter regional supply. The strength has been mirrored in a steepening backwardation in the Asian gasoil complex, especially for November-December and December-January derivative time spreads, which were pegged at plus 78 cents/b and plus 69 cents/b at 1010 GMT Oct. 11. At the Asian close Oct. 8, the November-December and December-January intermonth spreads were assessed at plus 72 cents/b and plus 67 cents/b, respectively, up from plus 57 cents/b and plus 58 cents/b at the start of the week.
Market participants said ongoing supply concerns have placed a floor under the ultra-low sulfur diesel market. “We are hearing that China’s gasoil exports will step down even more from previous months due to high coal prices and their domestic mandate to maintain supply of electricity and heating,” a regional trader said, adding that volumes in Asia have also been clearing out with the “arbitrage [to move Asian gasoil volumes to the West] pulling strong”
The Q1 2022-Q2 2022 gasoil swap spread averaged plus $1.74/b over Oct. 4-8, up from plus $1.56/b the week before.