Key Asian refiners are set to seal 2024 diesel export deals at lower premiums than last year as global supply is poised to rise next year amid slower global demand growth, five trade sources said.

South Korea’s top refiners, GS Caltex and SK Energy, a subsidiary of SK Innovation, are likely to close deals for 10ppm sulphur diesel with end-users at premiums between 50 cents and 60 a barrel to Singapore quotes, they added, down from premiums of $1 to $1.50 a barrel for this year’s supply.

This comes after Taiwan’s Formosa Petrochemical Corp (FPCC) 6505.TW sold at least one 750,000-barrel cargo per month to Western trading house Vitol at a premium of between 80 cents and $1 a barrel last month.

The fall in diesel premiums could weigh on refining profits for such major fuel exporters. The industrial fuel roughly accounts for 45% to 60% of refined fuel exports from Taiwan and South Korea, consultancy firm FGE said.

“Middle Eastern exports are rising for next (few) years and that is the bearish driver in the market,” said FPCC company spokesperson KY Lin.

Against a backdrop of higher supply,Asian refiners would either have to reduce output or sell refined fuelat lower prices, he added.

Asia and the Middle East account for about half of the world’s diesel supplies.

Traders were also reluctant to fork out higher premiums for term supply, a Singapore-based trading source said, as the average spot premium in 2023 was below $1.50 a barrel, lower than term premiums.
Source: Reuters (Reporting by Trixie Yap; Editing by Florence Tan and Gerry Doyle)