Asia’s middle distillates markets recorded a second week of gains on Friday amid concerns of declining prompt-loading supplies on some global unexpected and planned outages, overall a rise in spot liquidity and stronger-than-expected crude futures.
Worries of prompt-month supply tightness in some regions, such as southeast Asia and the West, led to a wider prompt-forward price backwardation in the late week against a backdrop of more February supplies with at least three refiners kickstarting their spot tender sales.
However, some buyers were still procuring February paper swaps as they were unclear how long these disruptions would last, one source said.
Trading activity in the paper swaps market picked up and was particularly brisk on the last trading day of the week.
Escalating tensions in the Red Sea also pushed the market up in tandem with crude futures towards the market’s closing.
Refining margins GO10SGCKMc1 rose by around 14% week on week to slightly above $24 a barrel on Friday，reflecting these worries.
Spot cash premiums GO10-SIN-DIF also climbed week on week to around a two-month high of $1.36 a barrel despite a volatile performance throughout the week, as traders mostly held mixed views on the market fundamentals – before news of possible supply disruptions came to light.
Lower-priced and ready sellers were initially aplenty in the physical markets since early week, partially due to the steady February supply expectations from regional refiners.
Jet fuel refining margins JETSGCKMc1 mostly trended in line with gasoil, albeit at a slower pace of 12% gains week on week given the lack of a clear market direction – though spot discussions for February were ongoing by at least two South Korean major refiners.
Some refiners are still mulling the continuous switch to jet fuel from gasoil production going into February and March given the slightly weaker regrade performance for the time being, despite higher cash premiums for selling the aviation fuel.
Regrade JETREG10SGMc1 slipped to a three week low at more than a $1 per barrel discount, against a backdrop of much stronger gasoil performance in comparison with jet fuel and thin open spot market activity for the latter.
SINGAPORE CASH DEALS
– Two gasoil deals, one jet fuel deal.
INVENTORIES
– ARA gasoil stocks, which include diesel and heating oil, rose by 10% in the week to Thursday to 1.962 million tons, according to data from Dutch consultancy Insights Global.
REFINERY NEWS
– Both crude distillation units (CDUs) and two vacuum distillation units (VDUs) shut down on Thursday at TotalEnergies TTEF.PA 238,000 barrel-per-day (bpd) Port Arthur, Texas refinery, sources familiar with plant operations said on Thursday.
NEWS
– China’s annual crude oil imports hit an all-time high in 2023, customs data showed on Friday, as fuel demand recovered from a pandemic-induced slump despite economic headwinds.
– Oil prices rose 2% on Friday as the United States and Britain carried out air and sea strikes on Houthi military targets in Yemen in response to attacks by the Iran-backed group on shipping in the Red Sea. O/R
– China’s exports grew at a faster pace in December, while deflationary pressures persisted last month, keeping alive expectations for more policy easing measures to shore up an economy carrying significant pockets of weakness into 2024.
– Central Asian countries, Afghanistan and Mongolia raised their imports of Russian fuel by around 28% in 2023 to almost 6 million metric tons, partially offseting a decline in Russian supplies to Europe, according to traders and industry data.
Source: Reuters (Reporting by Trixie Yap; Editing by Ravi Prakash Kumar)