Asia middle distillates: Key market indicators this week

Singapore — The Asian middle distillate complex opened the week of Jan. 18 on a mixed note. The jet fuel/kerosene market remained supported by seasonal kerosene demand from Northeast Asia, but lackluster requirements from the downstream aviation sector capped gains.

Meanwhile in the gasoil market, the middle distillate shrugged off healthy regional supply balances to remain steady-to-firmer, with regional demand providing support.

ICE March Brent crude futures fell $1.07/b at $54.66/b at 0300 GMT Jan. 18 from the 0430 GMT Asian close on Jan. 15.

Jet fuel/Kerosene

** The front-month February/March jet fuel/kerosene timespread was firmer at minus 25 cents/b at 0300 GMT, narrowing 2 cents/b from the Asian close on Jan. 15.

** The FOB Singapore jet fuel/kerosene cash differential was relatively steady in the week ended Jan. 15, ending the week at minus 21 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment, which is unchanged on the week.

** In Japan, although kerosene consumption has increased due to severe winters, jet fuel demand for international flights has been on a decline amid rising COVID-19 cases. The country re-imposed bans on domestic business travel due to the state of emergency declared in Tokyo and several other areas.

** Looking ahead, the aviation sector is set to face further headwinds due to rising COVID-19 cases, resulting in strict border restrictions. In a Jan. 15 report, S&P Global Platts Analytics said the resurgence of COVID-19 infections will further dampen air traffic, which already experienced a post-holiday season lull. The report added that demand is likely to remain subdued in the first half of 2021, with the recovery only picking up in the second half of the year as the impact of mass vaccination begins to register.

** The Q2/Q3 quarterly jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus 46 cents/b for the week Jan. 11-15, rising 24 cents/b, or 34.56% from the previous week's average of minus 71 cents/b.

Gasoil

** The February-March gasoil market structure was pegged at minus 13 cents/b at 0300 GMT, widening by 2 cents/b from the Asian close on Jan. 15, Platts data showed.

** The February Exchange of Futures for Swaps spread was pegged at minus $1.22/mt at 0300 GMT Jan. 11, narrowing in from an assessed minus $1.42/mt at the Jan. 15 close.

** While the February EFS is currently in negative terrain, indicating that Asian gasoil prices are lower than that in the West, the spread is still deemed to be too strong for arbitrage economics to work. As a result, India as well as Middle East barrels may still be attracted toward the East, with Asian gasoil barrels likely to remain trapped within the region.

** Despite the seemingly healthy supply volumes for January in Asia, with traders saying the region is expected to see good outflows of gasoil exports from China over January and February, the market has been supported, underpinned by regional demand seen from countries such as Myanmar and the Philippines.

** The Q2/Q3 quarterly gasoil swap spread -- an indication of near-term sentiment -- averaged at minus 11 cents/b for the week Jan. 11-15, rising 24 cents/b, or 68.97% from the previous week's average of minus 35 cents/b.