Singapore Jan regrade slumps to near 16-month low on weak jet fuel demand, firm gasoil

The Singapore balance-month January regrade swap -- the value jet fuel commands over 10 ppm sulfur gasoil -- widened to a near 16-month low at the Asian close Jan. 5 as a stalled recovery in the aviation sector weighed on jet fuel demand just as the Asian gasoil market firmed on tight supply.

The January regrade swap was assessed at minus $3.71/b Jan. 5, widening 58 cents/b or 18.53% day on day. It was last assessed lower at minus $5.40/b on Sept. 15, 2020, S&P Global Platts data showed.

The widening of the regrade swap was underpinned by uncertainty in the aviation sector as the omicron variant continues to sweep the globe, market sources said.

Over 4,000 flights globally were canceled Jan. 2, more than half of them in the US, amid holiday travel disruptions caused by inclement weather and the surge in coronavirus cases, according to media reports.

India's Directorate General of Civil Aviation has extended the suspension of scheduled incoming and outgoing international passenger flights until Jan. 31, shelving its initial plan to reopen international borders on Dec. 15.

Despite the dwindling demand, several trade sources said that regional refiners were likely to keep jet fuel production levels steady. "Jet [fuel] yield is already so low; most producers are keeping output at a minimal level. I don't see how it [jet fuel yield] can get much lower," a regional refiner said.

Reflecting the bearishness, the Singapore jet fuel/kerosene January-February derivatives was assessed at plus 23 cents/b at the Asian close Jan. 4, down 12 cents/b week on week, Platts data showed.

Gasoil firms

Meanwhile, lean supply and firm demand were bolstering the Asian ultra-low sulfur diesel market.

The firmer sentiment has been underpinned by several countries resisting a return to lockdowns despite grappling with surges in coronavirus cases, traders said.

This has driven a slow but gradual improvement in regional gasoil requirements and soaked up surplus barrels in the region due to a closed East-West arbitrage.

The balance month Singapore gasoil derivative time spread was assessed up 9 cents/b day on day at 95 cents/b at the Asian close Jan. 4, Platts data showed.