Asian refiners are selling February-loading gasoil and jet fuel cargoes at their deepest discounts in at least two months as regional freight costs jumped amid persistent Red Sea shipping disruptions, trade sources said on Thursday.

Supply in the region was also sufficient as the arbitrage window to Europe was closed since end-2023 and as Asian refiners ramped up output after scheduled maintenances, they said.

Chinese and South Korean refiners sold February gasoil and jet fuel cargoes at discounts of $1.40-$1.80 a barrel to Singapore quotes this week, the lowest levels in two and four months respectively, Reuters records showed.

The cargoes were being sold at premiums of up to $1 a week ago.

Buyers are unwilling to pay the same prices as intra-Asia freight costs have risen significantly, one refinery source said.

Freight costs for a medium-range (MR) tanker that can carry 40,000 metric tons of clean products between South Korea and Singapore jumped by more than $200,000 over the past three days to $1.15 million after holding steady last week, SSY Tankers’ data showed.

Two shipbroking sources said tanker supply has tightened following the Red Sea attacks that have forced ships to take the longer route via Cape of Good Hope instead of the Suez canal.

Buyers are mostly left with a pool of smaller MR-sized tankers since most long-range vessels that can carry 60,000-90,000 tons of fuel remain stuck in the West or in Africa after re-routing, one of the sources said.

With fewer tankers available, shipowners have jacked up rates for intra-Asia journeys, the source added.

This comes as China’s clean products exports are expected to stay robust in February, contiuning from January, which could further tighten tanker supply, the second source said.

Both India and Middle East have witnessed a decline in their spot cargo differentials as sellers attempt to counterbalance surging shipping costs in the current landscape, said Sparta Commodities analyst James Noel-Beswick.

Refiners in these regions can typically sell to northwest Europe given the closer geographical proximity compared with other Asian refiners.

Spot discounts for gasoil and jet fuel exports from India and Middle East have also widened to more than $1 a barrel this week, from 20-30 cents a barrel in the past two weeks, two trade sources said.
Source: Reuter (Reporting by Trixie Yap; Editing by Varun H K)