31 Aug 2020 | 04:59 UTC — Singapore

Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillates market is expected to remain on a divergent path for the week beginning Aug. 31, amid rare optimism in the Asian jet fuel/kerosene sector while the gasoil complex braces for further headwinds amid a resurgence of the coronavirus pandemic across the region.

ICE November Brent crude futures rose to $46.11/b at 0300 GMT Aug. 31, 67 cents/b higher from $45.44/b at the 0830 GMT Asian close on Aug. 28.

JET FUEL/KEROSENE

** The front-month September-October Singapore jet fuel timespread remained in a contango structure and was pegged at minus 90 cents/b at 0300 GMT Aug. 31, narrowing 2 cents/b from minus 92 cents/b at 0830 GMT on Aug. 28.

** Asia's aviation sector remained in the doldrums as demand for aviation fuels evaporated amid the coronavirus pandemic. This led the Singapore jet fuel against front month cash Dubai crude to fall to a three-month low of minus $2.49/b on Aug. 28. The crack was last assessed lower at minus $2.53/b on May 15, 2020, S&P Global Platts data showed.

** The Association of Asia Pacific Airlines on Aug. 27 reported that air passenger traffic in the Asia-Pacific region plunged 97.5% year on year in July and carried only 844,000 international passengers amid international border closures and other forms of onerous travel restrictions, crippling international travel.

** The Asian aviation sector could see some respite late in the week on positive headline news. Travel analytics company, ForwardKeys, reported on Aug. 26 that domestic air travel in China is forecast to reach a full recovery by the start of September and that domestic arrivals at Chinese airports reached 86% of 2019 levels in the second week of August.

** According to an earlier report by S&P Global Platts Analytics, Asian jet fuel/kerosene demand recovery continues as more flights are resuming and demand is expected to increase from 1.3 million b/d in Q2 2020 to 1.7 million b/d in Q3 2020.

GASOIL

** The contango in the front month Singapore September-October structure was valued at minus 46 cents/b at 0300 GMT Aug. 31, narrowing from minus 58 cents/b on Aug. 28.

** The September Exchange of Futures for Swaps spread was pegged at plus $1/mt at 0300 GMT Aug. 31, narrower from plus $1.18/mt at the Aug. 28 Asian close.

** Demand concerns still dominate the outlook for the Asian gasoil market, which is expected to experience stronger headwinds in the week ahead as regional supplies show no signs of abating.

** Across the region, local news media reported spikes in the number of confirmed coronavirus cases over the weekend, leading to some countries announcing stricter enforcement of lockdowns and restrictions. Seoul, South Korea's capital, has announced that the week starting Aug. 30 has been designated as a week of 'standstill', with its 10 million citizens to remain at home as the city fights to bring the virus under control. In India, the country reported the world's highest daily surge in infections over a 24-hour period on Aug 30.

** Meanwhile, market participants will be assessing the impact of the storms in the US in an effort to ascertain any possible knock-on effect that it may have on the Persian Gulf gasoil market. Sources have said that Persian Gulf-origin gasoil sentiment may see some support from this, along with stronger spot demand from East Africa.

** Tender award results for spot gasoil cargoes for loading over September from Kuwait Petroleum Corp. as well as The Bahrain Petroleum Co. B.S.C., or Bapco, are expected later in the week, which should provide directional pricing cues for the market, trade sources said.


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