Asia’s middle distillates markets posted the first week of losses in three on Friday as thin spot trading liquidity became even more prevalent, despite strong regrade spreads mid-week, against a backdrop of softer crude futures.
“With Singapore’s middle distillate stocks hitting close to a two-and-a-half-year peak and a decline in gasoil demand in the region, this prolonged weakness is expected to persist,” said Sparta Commodities’ analyst James Noel-Beswick.
Cracks and prices of gasoil, however, recorded little change throughout the week on limited fluctuations in market fundamentals. Demand from the West has been thin due to a closed arbitrage despite the onset of winter and regional buying remained muted.
The jet fuel market was supported by an opened east-west arbitrage to the U.S. West Coast and some demand pull from northwest Europe for earlier November loading cargoes ahead of the winter seasonal peak for heating oil demand.
Refining margins for 10 ppm sulphur gasoil closed the trading session at slightly above $22 a barrel.
Spot cash differentials for both December and January cargoes remained in wider discounts week-on-week at 52 cents a barrel, reflecting expectations of acautious demand outlook.
The market is still trading at discounts despite the backwardated price structure, though physical cargo sellers are still unwilling to lower their offers.
Front-month regrade spreads between jet fuel and gasoil surged to a fresh five-year high on Wednesday but closed the week back to a discount of around 60 cents a barrel, presumably because of the month-end shortcovering and position rollover activities.
Cash premiums for jet fuel cargoes surged above $1.50 a barrel at the close of the week as well, as some prompt demand emerged after thin trades for the past two months.
SINGAPORE CASH DEALS
– No deals for both fuels
INVENTORIES
– Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub were down 5.5% to 1.74 million tons as imports from the Middle East slowed in the week.
NEWS
– Top oil exporter Saudi Arabia may trim the price of its flagship Arab Light crude to Asia for the first time in seven months, despite an extension of its voluntary supply cut, as the market deals with ample supply and tepid demand.
– OPEC+ oil producers on Thursday agreed to voluntary output cuts totalling about 2.2 million barrels per day (bpd) for early next year led by Saudi Arabia rolling over its current voluntary cut.
– Mixed factory activity data for China in November suggests more stimulus will be needed to shore up economic growth, analysts said on Friday, as two surveys came to contrasting conclusions on the sector’s health.
– Oil prices pared losses on Friday, after falling sharply in early trade and by over 2% on Thursday on perceptions that the voluntary oil output cuts agreed by OPEC+ producers were underwhelming.
Source: Reuters (Reporting by Trixie Yap; Editing by Sohini Goswami)