Asia’s middle distillates markets were volatile against a backdrop of softer crude futures and ICE gasoil futures performance, and as concerns of a possible easing supply glut regionally for December emerged.
The November/December swaps backwardation fell by almost 60% day on day, with several sellers in the market, pressuring spot cash premiums for 10ppm sulphur gasoil for a second consecutive session to a four-month low at around 79 cents a barrel. November and December sellers were plentiful.
Weakness in November swaps widened the east-west arbitrage slightly, with the exchange of futures for swaps (EFS) spread hitting around $65 per metric ton.
Refining margins however rebounded to slightly above $24.50 a barrel, with some support coming from cautious supply expectations for December.
Expectations of lower exports from China for November emerged, which could rein in the current regional supply glut situation, with October official customs data signalling that there may not be sufficient quotas for the majors until year end. This comes amid lower crude run expectations for the next two months in the country.
A handful of northeast Asia refiners were still mulling December spot sales as evidenced from the lack of discussions, contributing further to expectations of lower supply.
Jet fuel refining margins slipped at a slower pace and the regrade continued its incline as trade sources were still expecting travel demand to remain steady before the holiday season in December. Heating oil demand expectations were also present, supporting the regrade values.
The main driver for narrower regrade values is still the weakness in prompt gasoil prices, one refinery source said.
SINGAPORE CASH DEALS
– No deals for both fuels.
NEWS
– China’s commerce ministry on Tuesday said it will require traders of crude oil, iron ore, copper concentrate and potash, which are subject to import licences, to submit real-time information on shipments as part of efforts to stabilize trade.
– China imported 13.52% more crude oil in October from a year earlier, data showed on Tuesday, as refiners stepped up purchases using fresh import quotas and as domestic fuel demand expanded during the Golden Week holiday.
– Oil prices slipped by 1% on Tuesday, erasing most of Monday’s gains, as mixed economic data from the world’s second-largest oil consumer China and winter demand worries offset the impact of Saudi Arabia and Russia extending output cuts.
– U.S. crude oil refiners this quarter will pull back from red-hot summer run rates as weak gasoline margins and plant overhauls cool operating goals, according to company statements and oil analysts.
Source: Reuters (Reporting by Trixie Yap; Editing by Shweta Agarwal)