Asia’s middle distillates markets recorded a bout of even thinner trading activity as freight costs surged for the third straight day, with cracking margins closing at the lowest point this week though cash premiums almost hit a four-month high.
Prompt swap prices remained supported by the mounting freight rates both within Asia and outside of Asia, one source said, but activity has toned down over the past two days.
Buyers or sellers are still uncertain who should be absorbing the increments from the rising costs week-on-week, a second trade source said.
Support also came from talks of China’s major exporters withholding their February offers and possibly adjusting their overall sales programme for the month, should their export margins be crimped by the surge in freight costs, two sources said.
Refining margins GO10SGCKMc1 for the transport and industrial fuel slipped to a three-week low of slightly more than $21.50 a barrel on Friday.
Spot cash premiums GO10-SIN-DIF, on the other hand, were supported, hitting a near four-month high at $2.16 a barrel, by a much steeper prompt-forward price swap backwardation in the afternoon trading session.
On the jet fuel front, fundamentals looked turned rosy after the arbitrage window between Asia and the U.S. West Coast stayed open for the third straight session – despite hefty freight costs. However, some cautiousness remained if trade volumes could flow there given that U.S. prices were prompt month.
The east-west arbitrage between Asia and northwest Europe also stayed open for most of this week, as Asian jet fuel prices were pressured by ample supply expectations running into February.
Traders could be pressuring the jet fuel prices to keep the east-west arbitrage open so there is an outlet for these cargoes giving muted regional demand, one refinery source said.
Regrade posted a sixth consecutive session of losses to close the week at a discount of $2.65 a barrel – a three-month high.
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 fell by around 8% in the week to Thursday to 1.695 million metric tons, according to data from Dutch consultancy Insights Global.
REFINERY NEWS REF/OUT
– U.S. refiner Valero Energy Corp said its 14 refineries were scheduled to operate between 83% and 86% of their combined total throughput capacity of 3.15 million barrels per day (bpd) in the first quarter of 2024.
NEWS
– Chinese officials have asked their Iranian counterparts to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis, or risk harming business relations with Beijing, four Iranian sources and a diplomat familiar with the matter said.
– Oil prices eased on Friday but were set for their biggest weekly gain since October as positive U.S. economic growth and signs of Chinese stimulus boosted fuel demand sentiment.
– Freight going through the Suez Canal has dropped by 45% in the two months since attacks by Yemen’s Houthis led shipping groups to divert freight, disrupting already strained maritime trading routes, according to UN agency UNCTAD.
– Asian refiners are pinning their 2024 jet fuel demand hopes on continued air travel recovery from China and southeast Asia, with supply movements to be driven by output from a spate of new Middle East capacity, traders and analysts said.
Source: Reuters (Reporting by Trixie Yap; Editing by Shweta Agarwal)