Asia’s middle distillates markets were firmer owing to the re-emergence of supply concerns from unexpected production issues globally, against a backdrop of volatile east-west spreads and crude futures.
Worries about the cold snap in some parts of the U.S. contributed to gains in the futures markets and consequentlythe swaps market.
A slew of unplanned production issues in southeast Asia and the U.S. REF/OUT remained in focus as some traders were concerned abouthow long these would last. One refiner has indicated a lack of spot lots for February, despite earlier expectations of availability.
The east-west arbitrage differentials, measured by the exchange of futures for swaps (EFS) price spread, were volatile through the day and that also contributed to a flurry of swaps trading activity in the open market in thelate afternoon session.
The differential closed at slightly above $40 a metric ton at the end of the trading session, at least $10 higher compared with the past few weeks.
However, ample supplies from someremaining sellers for February such as China and South Korean refiners capped overall gains. GS Caltex beganoffering several spot lots again for the second half of February in the afternoon via a sales tender.
Refining margins surged by $1 a barrel from the previous trading session to hit almost $24 a barrel.
Cash differentials surged further to $1.55 a barrel on ongoing buying interest from Vitol for physical February cargoes and an overall lack of selling interest in the open market.
The narrower backwardation for February-March swap prices capped overall increments.
Jet fuel refining margins climbed as well, with negotiations ongoing for South Korea-origin spot lots at premiums to free-on-board Singapore price quotes.
Regrade kept almost steady as the activity in jet fuel swaps wascomparatively thinner than gasoil.
SINGAPORE CASH DEALS
– No deals for both fuels
NEWS
– Chinese refiners are actively booking crude oil cargoes for delivery in March and April to replenish stocks, locking-in relatively low prices and in anticipation of stronger demand in the second half of 2024, trade sources said.
– India cut its windfall tax on petroleum crude to 1,700 rupees ($20.53) a tonne from 2,300 rupees a tonne, according to a government notification on Monday.
– Oil prices rose on Tuesday, as investors weighed the impact of tensions in the Middle East.
– China’s oil products exports are set to rebound in January as refiners, armed with fresh quotas, boost diesel shipments and jet fuel sales for peak Lunar New Year travel, estimates from traders and analysts showed.
Source: Reuters (Reporting by Trixie Yap; Editing by Janane Venkatraman)