Asia’s middle distillates markets were little changed after previous session’s weakness, as paper market activity picked up, though physical cargo activity thinned at the month-end and ahead of July spot discussions.
Downside pressures were mostly attributed to a build-up in stockpiles in the West, weakness in upstream crude futures and slightly mixed outlooks for June market fundamentals.
Consistently sufficient supplies in the near term could still be a bearish factor, one source said.
Some refiners are still having high inventories for now but holding back on selling off cargoes given the market structure and worries that selling more cargoes will dent prices further, a second source said.
In paper markets, the June-July price spread turned back into a backwardated structure for the first time in almost two months as June buying interest picked up amid talks of slightly better regional demand on refinery troubles and maintenance.
Short covering buying at the end of the month, coupled with an even higher possibility of tighter prompt supplies from a key southeast Asian refiner contributed to the June paper strength.
Meanwhile, talks of traders looking to charter dirty tankers to carry clean products such as diesel emerged again – this time either from Singapore or the Middle East to the west of Suez markets.
Refining margins closed 1% higher week on week at around $14 a barrel, but they were flat month on month.
Spot market discounts did narrow slightly week on week but they remained near 20 cents a barrel as a buy-sell gap hindered discussions in the past few trading sessions.
Jet fuel paper swaps also went back into a backwardated price structure for the third straight session, owing to expectations of some prompt regional demand being supportive to fundamentals.
However, sufficient supplies from China may limit any market upside in the short run, sources said.
Regrade was flat week on week at discounts of around $1.50 a barrel, but they still gained month on month against a backdrop of bullish expectations for demand of the aviation fuel.
SINGAPORE CASH DEALS
– No deals for both fuels.
INVENTORIES
– Gasoil stocks edged 2.7% lower to 2.26 million tons, even as demand up the Rhine dropped significantly on the week. ARA/
– U.S. crude oil inventories decreased while fuel stockpiles rose last week, as refining activity jumped, the Energy Information Administration (EIA) said on Thursday.
NEWS
– OPEC+ is working on a complex deal to be agreed at its meeting on Sunday that will allow the group to extend some of its deep oil production cuts into 2025, three sources familiar with OPEC+ discussions said on Thursday.
– Malaysia’s state energy firm Petroliam Nasional (Petronas) reported a near 11% decline in first-quarter net profit on Friday due to higher operating costs and lower realised prices across its businesses.
– China’s manufacturing activity unexpectedly fell in May, keeping alive calls for fresh stimulus as a protracted property crisis in the world’s second-largest economy continues to weigh on business, consumer and investor confidence.
Source: Reuters (Reporting by Trixie Yap; Editing by Vijay Kishore and Ravi Prakash Kumar)