Asia’s middle distillates markets were supported for a third consecutive session by stronger performance in the West, despite thin trading activity within the region and December spot discussions yet to emerge.
The December east-west arbitrage spread, measured by the exchange of futures for swaps (EFS) differential between prompt month gasoil swaps and ICE gasoil futures, widened to a two-week high discount of $58 a metric ton.
Analysts are still expecting Europe’s import demand to emerge in the near term and support global prices until the year end.
While there are still some bearish demand factors “such as reduced German gasoil demand and signs of an economic downturn in the Eurozone reflected in the downward trend of ICE gasoil cracks”, the market has rallied in the past few days and this reflects the clear signals from Europe that it requires additional product supplies, said Sparta Commodities analyst James Noel-Beswick.
Refining margins GO10SGCKMc1 for 10ppm sulphur gasoil climbed to around $24.80 a barrel.
Spot cash premiums GO10-SIN-DIF for the fuel rose by 4 cents, but activity remained limited in the open trading market amid a buy-sell gap.
However, some cautiousness among trade sources on how Asian heating demand will pan out during the winter season capped overall market gains, with one Japanese refiner saying that import demand could be delayed this year by sufficient local stocks with respect to jet fuel/kerosene.
Jet fuel refining margins JETSGCKMc1 rose in tandem, with the regrade JETREG10SGMc1 remaining almost unchanged from the previous session.
SINGAPORE CASH DEALS O/AS
– One 500ppm sulphur gasoil deal, no jet fuel deal.
INVENTORIES
– Distillate stockpiles USOILD=ECI in the U.S., which include diesel and heating oil, fell by 0.8 million barrel in the week to 111.3 million barrels, as demand for heating oil picked up seasonally, the Energy Information Administration said on Wednesday.
– Singapore’s middle distillates inventories surged by almost 1 million barrels, as persistently lower gasoil outflows for a second straight week offset an increment in jet fuel/kerosene net exports, official data showed on Thursday.
NEWS
– Russia’s November exports of ultra low-sulphur diesel (ULSD) from the Baltic Sea port of Primorsk are set to rise by 136% month-on-month to 1.6 million metric tons from 0.7 million tons scheduled for October, two traders said on Wednesday.
– Winter is expected to arrive late, and suddenly in Beijing this year as daytime temperatures hovered above 20 degrees Celsius (68 Fahrenheit), bathing the capital in a warm smog, while other parts of China basked in record highs above 30C.
– Oil gained 1% on Thursday to snap its three-day decline, as risk appetite returned to financial markets after the U.S. Federal Reserve kept benchmark interest rates on hold.
Source: Reuters (Reporting by Trixie Yap; Editing by Shweta Agarwal)