Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillate market is expected to remain supported by supply tightness for the week over June 15-19 as regional demand continues to improve following a gradual roll-back in coronavirus-related precautions and lockdowns, which comes even as some discretionary run-cuts, maintenance and idling of refinery units remain in place.

In addition, industry sources expect firmer jet fuel demand as regional airlines ramp up flight frequency and capacity on the back of easing travel and border restrictions.

Similarly, sentiment in the gasoil arena is expected to gather support from emerging regional demand. Supply inflows from India and the Middle East to the main trading hub of Singapore due to a still-strong Exchange of Futures for Swaps spread is, however, likely to cap the upside, some sources added.

August ICE Brent crude futures dipped 35 cents/b to $37.84/b at 0447 GMT on June 15, down from $38.19/b 0830 GMT close in Asia on June 12.

JET FUEL/KEROSENE

** The balance month June/July Singapore jet fuel timespread kicked off the week starting June 15 on a stronger note, rising 7 cents/b from June 12 to minus 74 cents/b at 0300 GMT on June 15.

** Domestic and international flight resumption remains the key theme in the Asian jet fuel market. Industry sources noted that the recent resumption of global flights will aid the aviation sector further and boost sentiment sentiment, along with jet fuel prices.

** Japan Airlines said it expects the cancellation rate of its domestic flights to fall to 54% in the second half of June, from 72% in H1 June, in anticipation of a rise in demand following the recent lifting of Japan's state of emergency measures.

** In Vietnam, the finance ministry is considering the lowering of the country's environmental protection tax on jet fuel by 30% to support its aviation sector.

** In India, India's jet fuel consumption registered at 111,000 mt in May, rising 55,000 mt, or 98% from its record low consumption of 56,000 mt in April as the country resumed domestic flight capacities in late May, latest data from the Petroleum Planning and Analysis Cell showed.

** A firmer outlook was also observed with the Q3/Q4 quarterly jet fuel/kerosene spread -- an indication of near-term sentiment -- which narrowed to minus $2.34/b at the Asian close June 12, up 48 cents/b or $17.02% week on week, Platts data showed.

GASOIL

** The backwardation in the Singapore gasoil balance June/July structure firmed to plus 56 cents/b on June 15, up from plus 40 cents/b on June 12.

** The front-month July Exchange of Futures for Swaps spread was pegged at plus $3/mt at 0300 GMT June 15, down from plus $3.82/mt at the June 12 Asian close.

** Traders said the Asian gasoil market has been underpinned by firmer sentiment due to a lack of replacement barrels being seen from the main supply centers of Japan, South Korea, Taiwan as well as China. This comes even as regional gasoil demand has improved, most notably from Southeast Asian countries, with market participants saying that Myanmar and Vietnam, in particular, have been drawing in steady volumes of gasoil. Gasoil demand has also been seen further north, from the Philippines.

** Market sources are looking forward to South Korea's July-loading marketing program for gasoil volumes, which is to start week June 15-19, for further indications on spot availability as well as directional pricing cues. But some traders have already said they expect the July program to be similar to the June program. S&P Global Platts previously reported that the June marketing program saw two MR-sized cargoes of 10 ppm sulfur gasoil offered by one South Korean refiner, and no 500 ppm sulfur gasoil barrels offered at all.

** China's July export volumes for gasoil have been estimated at steady to slightly higher levels than June, at around 500,000-600,000 mt. June exports volumes were estimated at 500,000 mt.

** While some traders said the firm EFS, which has trapped Asian barrels within the region as well as directed additional volumes from India and the Persian Gulf to flow in may cap further upside to the market, other sources said the incremental volumes are able to find homes within the region as they fill up the gaps left behind by the fall in export volumes from North Asia.