Asia’s middle distillates markets continued to post gains from a week earlier, both on spot premiums and margins basis, on a late-week surge in the futures market and some increased buying activity in the region.
Spot market differentials for mostly January cargoes swung to a premium for the first time in a month, after a five-session gain this week, owing to stronger demand and overall expectations of declining supplies from the gasoil-jet fuel yield switch since a month earlier.
Some regional buyers emerged seeking higher-sulphur gasoil for both prompt and January deliveries, buoying demand as well.
Lower-priced sellers remained scant, given the uncertainty in January-loading supplies from some refiners especially in South Korea and China. South Korean exporters have been slow with their January sales given some ongoing term negotiations, while China’s export quotas have yet to emerge, two trade sources said.
Refining margins for 10 ppm sulphur gasoil closed the session at around $23 a barrel, almost 3% higher than a week earlier.
Jet fuel refining margins JETSGCKMc1 gained at a quicker pace this week, fuelled by some expectations of stronger heating oil demand to emerge soon as talks of buying interest from northeast Asia surfaced for the first time since the start of winter in this region.
China’s international airline capacity numbers continue to climb, with international seats at 62% of December 2019, flight analytics firm OAG said.
A closed east-west arbitrage however capped overall market strength for the aviation and heating fuel.
Regrade JETREG10SGMc1 had a volatile week owing to thin spot trading liquidity and overall mixed outlook among traders, as gasoil swaps staged a late-week recovery and sellers cleared their positions for fear of a narrowing spread. The value closed at a premium of 60 cents a barrel despite this, up from a discount last Friday.
SINGAPORE CASH DEALS O/AS
– One gasoil deal, no jet fuel deal.
INVENTORIES
– Gasoil inventories held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub were up about 1% to 1.79 million tons as demand from inland locations slowed and as high water levels on the Rhine river slowed down trading activity.
NEWS
– China’s oil refinery throughput in November fell versus the previous month as independent refiners cut run rates amid weak margins and crude oil imports slowed.
– The Biden administration is expected this week to recognize a soon-to-be-updated methodology favored by the ethanol industry in guidance to companies looking to claim tax credits for sustainable aviation fuel (SAF), three people familiar with the matter told Reuters.
– China’s industrial output grew 6.6% in November year-on-year, faster than the 4.6% gain in October, and retail sales rose but missed forecasts, adding to signs Beijing’s recent flurry of stimulus is helping stabilise the economy.
Source: Reuters (Reporting by Trixie Yap; Editing by Shailesh Kuber)