Monday, 27 January 2020 | 19:15
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Asia Distillates-Gasoil refining margins hit 2-week high

Tuesday, 03 December 2019 | 00:00

Asian refining margins for 10ppm gasoil rose on Monday to their strongest in two weeks, partly buoyed by expectations of firmer upcoming demand as a deadline for switching to cleaner marine fuels closes in.

Some refinery run cuts in the region is also partly helping to trim the availability of gasoil supplies, trade sources said.

Refining margins, also known as cracks for 10 ppm gasoil climbed to $15.25 a barrel over Dubai crude during Asian trading hours on Monday, their strongest since Nov. 18. The gasoil cracks were $14.33 a barrel on Friday.

New International Maritime Organization (IMO) rules from Jan. 1, 2020 prohibit ships from using fuels containing more than 0.5% sulphur, compared with the current 3.5%, and some ship owners would likely switch to marine gasoil (MGO) to adhere with the regulations.

But market participants now increasingly expect cheaper very low sulphur fuel oil (VLSFO) to take away some of this incremental demand for MGO as a replacement for high-sulphur fuel.

Cash premiums for gasoil with 10 ppm sulphur content GO10-SIN-DIF rose to 19 cents a barrel to Singapore quotes on Monday, helped by firmer deal values in the physical trade window on Monday. They were at a premium of 5 cents a barrel on Friday.

Meanwhile, cash differentials for jet fuel JET-SIN-DIF were at a discount of 36 cents per barrel to Singapore quotes on Monday, compared with a discount of 50 cents a barrel on Friday.

Refining profit margins for jet fuel rose to $14.91 per barrel over Dubai crude on Monday, up from $13.93 a barrel in the previous session on Friday.

ASIAN REFINERS STRIVE TO FINISH IMO PREPARATIONS

– At SK Energy’s largest refinery in South Korea, engineers are rushing to complete a new processing unit ahead of schedule as the firm looks to boost sales of low-emission fuels before new marine fuel standards take effect in just one month.

– In Japan, the country’s second-biggest refiner Idemitsu Kosan Co is taking a more cautious stance, increasing capacity for low sulphur fuel oil (LSFO), but also relying on blending to produce IMO2020 compliant bunker fuel.

– The different approaches come as refiners across the world grapple with the shipping industry’s most drastic fuel transition since it moved from burning coal to oil early last century.

SINGAPORE CASH DEALS

– Two 10ppm gasoil trades, one jet fuel deal.

– Unipec bought 150,000 barrels of 10 ppm gasoil from Total for Dec. 17-21 loading at a premium of 30 cents a barrel to the balance of December Singapore quotes.

– Unipec bought another 150,000 barrels of 10 ppm gasoil from Trafigura for Dec. 17-21 loading at a premium of 30 cents a barrel to Singapore quotes.

– Singapore trader Hin Leong bought 210,000 barrels of jet fuel from BP for Dec. 17-21 loading at $74.10 per barrel.

OTHER NEWS
– OPEC and allied oil producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd, Iraq’s oil minister said on Sunday.

– Oil prices rose more than 1% on Monday as signs of rising manufacturing activity in China pointed to increasing fuel demand, and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.

    ASSESSMENTS
 MID-DISTILLATES                                                                         
 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                71.59    -2.12      -2.88       73.71  GO-SIN
 GO 0.5 Diff                      -3.22     0.00       0.00       -3.22  GO-SIN-DIF
 Spot Gas Oil 0.25%               72.20    -2.13      -2.87       74.33  GO25-SIN
 GO 0.25 Diff                     -2.61    -0.01       0.38       -2.60  GO25-SIN-DIF
 Spot Gas Oil 0.05%               74.48    -2.13      -2.78       76.61  GO005-SIN
 GO 0.05 Diff                     -0.33    -0.01       3.12       -0.32  GO005-SIN-DIF
 Spot Gas Oil 0.001%              75.01    -1.97      -2.56       76.98  GO10-SIN
 GO 0.001 Diff                     0.19     0.14     280.00        0.05  GO10-SIN-DIF
 Spot Jet/Kero                    73.76    -2.33      -3.06       76.09  JET-SIN
 Jet/Kero Diff                    -0.36     0.14     -28.00       -0.50  JET-SIN-DIF

Source: Reuters (Reporting by Koustav Samanta; Editing by Rashmi Aich)

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