Asia’s gasoil refining margins and cash premiums on the last trading session for the year both declined by about 50% year-on-year, reflecting weakness in demand-supply fundamentals against a backdrop of softer ICE gasoil futures since September.

Regional supplies remained ample formost of the second-half ofthis year, withlimited planned maintenance and healthy production output andmiddle distillates extraction still proving to be the most lucrative for major refiners.

Robust export volumes from China were also in the fray.

Demand from the West proved to be poor this year, with the east-west arbitrage window – typically measured by the exchange of futures for swaps (EFS) spread remaining mostly below $60 per metric ton – closed for most of the year.

Regional demand only picked up towards the year-end as some buyers in southeast Asia had to cover their requirements from scheduled refinery maintenance.

Meanwhile, jet fuel refining margins also weakened in tandem with gasoil – although demand towards the year-end did pick up from the heating oil sector in northeast Asia. A closed arbitrage for exports to the West, such as the U.S. West Coast, since November weighed downslightly on fundamentals.

Concerns remainabout whether this demand can be sustained inearly 2024, casting a cloudy outlook on the market. Seat capacity numbers in Asia are expected to only return to pre-pandemic levels in the third quarter of 2024, especially in southeast Asia, according toseveral analysts.

Supply-wise, volumes were ample throughout the year and this situation is likely to continue into thefirst-half 2024, owing to higher exports from China. Some switches in production to jet fuel instead of gasoil inthe past two months also added to supplies.

Regrade remained in discounts of nearly50 cents a barrel on the last trading day of the year, down from almost flat in the same period in 2022, reflecting the weakness in jet fuel compared to gasoil.

SINGAPORE CASH DEALS

– No deals for both fuels.

INVENTORIES

– U.S. crude and gasoline inventories fell more than expected last week on strong exports, while distillate stocks rose, the U.S. Energy Information Administration said on Thursday.

– Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose 4% in the week to Thursday to 1.825 million metric tons, according to data from Dutch consultancy Insights Global.

NEWS

– OPEC is facing weakening demand for its crude in the first-half of 2024 just as its global market share declines to the lowest since the Covid-19 pandemic on the back of output cuts and member Angola’s exit, according to Reuters calculations and data from forecasters.

– Oil prices are set to end 2023 about 10% lower, the first annual decline in two years, after geopolitical concerns, production cuts and global measures to rein in inflation triggered wild fluctuations in prices.
Source: Reuters (Reporting by Trixie Yap; Editing by Sonia Cheema)