Gasoil refining margins drop, cash discounts narrow
Asian refining margins for 10ppm gasoil slipped to their lowest in over a week on Monday amid steady crude prices, while cash discounts for the industrial fuel narrowed as the prompt-month spread flipped into a backward dated structure.
Refining profit margins, also known as cracks, for 10ppm gasoil fell to $15.12 a barrel over Dubai crude during Asian trading hours, lowest levels since June 28.
The cracks for the benchmark gasoil grade, which hit a four-month high of $16.23 a barrel earlier last week, were at $15.39 per barrel over Dubai crude on Friday.
The recent strength in gasoil margins have started to cool off as there are still plenty of supplies in the market, while demand is seasonally weak due to the ongoing monsoon, a Singapore-based trader said.
Diesel demand typically takes a hit during monsoon months in Asian markets, including India, Philippines, Vietnam, and parts of South East Asia, as heavy rainfall and sometimes floods curtail demand for the transportation fuel, trade sources said.
Cash differentials for gasoil with 10ppm sulphur content were at a discount of 17 cents a barrel to Singapore quotes on Monday, compared with a discount of 20 cents per barrel on Friday.
The July/August time spread flipped into backwardation on Monday to be at a premium of 5 cents per barrel, as against a discount of 22 cents on Friday.
Backwardation, when the front-month contract is more expensive than subsequent months, makes it uneconomical to store the product, resulting in a drawdown in inventories. It is usually seen as a sign that the market is rebalancing and prices are likely to head higher in future months.
Meanwhile, cash premiums for jet fuel dipped to 19 cents a barrel to Singapore quotes on Monday, compared with Friday’s premium of 22 cents a barrel.
Jet fuel cracks fell to $14.46 a barrel over Dubai crude, down from $14.82 a barrel on Friday.
CHINA OUTPUT CUT
– China’s fuel producers are making extended curbs to their output in the third quarter after supply from mammoth new refineries stoked an already-sizeable glut, potentially dragging on crude oil demand from the world’s biggest importer of the commodity.
– In the wake of that wave of fresh supply and amid slowing local demand for fuels such as gasoline and diesel, refiners are cutting their crude processing, or throughput, industry sources and analysts said. The swollen surplus of fuel products could also send China’s fuel exports surging to new highs and further pinch Asian refining profits.
– Small-scale refiners known as ‘teapots’, mainly located in Shandong province, are coming under most pressure to make fresh output cuts, analysts said, extending curbs many of them made in May and June.
– Sri Lanka’s Ceylon Petroleum Corp (Ceypetco) has amended a term tender to buy 500 ppm sulphur gasoil by changing the total quantity to 1.96 million barrels from 2.1 million barrels earlier, to be delivered over nine months between Oct. 1, 2019 and June 30, 2020.
– The total contractual quantity would constitue of seven shipments of 280,000 barrels each, the tender document showed.
– The tender closes on July 23 and will be valid for 90 days.
SINGAPORE CASH DEALS
– Three gasoil trades, no jet fuel deal
– Vitol bought 150,000 barrels of 10ppm gasoil from Trafigura for July 23-27 loading at a discount of 20 cents a barrel to Singapore quotes.
– Singapore trader Hin Leong sold 150,000 barrels of 10ppm gasoil to Vitol for July 23-27 loading at a discount of 20 cents a barrel to Singapore quotes.
– Hin Leong sold another 250,000 barrels of 10ppm gasoil to Vitol for Aug. 2-6 loading at a discount of 20 cents a barrel to Singapore quotes.
– Crude prices edged higher on Monday, supported by last week’s better-than-expected U.S. jobs data and geopolitical risks, but worries that a slower global economy will curb appetite for oil kept a lid on prices.
– The planned closing of an oil refinery in Philadelphia damaged by a massive fire last month will reverse nearly two years of capacity gains at U.S. refineries, according to a Reuters analysis of government data.
– The UK-flagged supertanker Pacific Voyager that halted in the Gulf on Saturday is “safe and well,” a British official told Reuters, after Iran dismissed reports its Revolutionary Guards had seized the vessel.
– Iran’s Oil Minister Bijan Zanganeh said on Sunday that he was very hopeful of an improvement in the country’s crude exports, state TV reported, in spite of tightened U.S. sanctions on Tehran’s main source of income.
Source: Reuters (Reporting by Koustav Samanta; Editing by Rashmi Aich)