Asia’s 10 ppm sulphur gasoil market activity turned slightly more brisk, with some October sellers starting their discussions for spot lots and the prompt east-west arbitrage price differential widening.
Some traders were still hesitant to enter discussions, capping overall market activity, as they believed the market to be overheated given positive demand-supply outlooks entering the northern hemisphere winter.
“The concern for the market is that in most regions inventories are tight as we head closer to the Northern Hemisphere winter – a period where we usually see stronger demand for middle distillates,” ING analysts wrote in a client note.
Refining margins climbed back to a two-week high, supported by expectations of tighter supplies in the West as the maintenance season in northwest Europe starts.
The east-west arbitrage, typically represented by the exchange of futures for swaps, remained at around $85 a ton – a ten-month high. Discussions, however, were scant for cargoes heading there now due to the steep price backwardation, one source said.
Cash differentials fell to $1.94 a barrel as some selling interest remained firm for spot prompt lots.
Jet fuel refining margins climbed by a similar proportion, with support still coming from the opened arbitrage differential between Asia and the U.S. West Coast.
At least one more cargo is slated to be loaded next week from South Korea to the U.S. West Coast, shiptracking data showed. This is on top of two spot cargoes likely to head there since last Friday.
Two export cargoes from China will also be heading to northwest Europe given the lucrative margins for arbitrage tradeflows now.
Regrade kept mostly steady at a discount of around $1.50 a barrel day on day given the steady fundamentals for both fuels.
SINGAPORE CASH DEALS
– Three gasoil deals, no jet fuel deal.
REFINERY NEWS
– Japan’s Cosmo Oil, a unit of Cosmo Energy Holdings, shut down the 86,000 barrels-per-day (bpd) crude distillation unit (CDU) at the Yokkaichi refinery on Sept. 9 due to electrical system trouble, a company spokesperson said.
INVENTORIES
– Analysts polled by Reuters estimated stockpiles of gasoline were down by about 200,000 barrels last week, while distillate stockpiles, which include diesel and heating oil, were seen up by about 1.4 million barrels.
NEWS
– European oil refiners are set to have an autumn maintenance season less busy than usual, analysts and traders say, as they try to capture higher profit margins amid low fuel inventories and robust demand for gasoline and diesel.
– Brent crude futures held above $90 a barrel on Tuesday, with investors looking out for macroeconomic data that could indicate whether interest rates will rise further in the United States and Europe.
– India plans to propose imposing an additional 10% tax on diesel engine vehicles in an attempt to reduce pollution from diesel vehicles in the world’s third largest car market.
Source: Reuters (Reporting by Trixie Yap; Editing by Krishna Chandra Eluri)