Asia middle distillates: Key market indicators this week

Singapore — The Asian middle distillates market is poised to enter the week of March 8 on weaker footing but participants cautioned that volatility in the upstream crude oil complex, in the wake of attacks on Saudi Arabia's oil facilities, could potentially tilt sentiment.

Extended bearishness on the downstream aviation sector as passenger traffic remained heavily affected by the coronavirus pandemic weighed on jet fuel sentiment. Likewise, gasoil saw its recent downtrend extended, this time on supply woes as higher exports from key producers led to a supply overhang in the region.

JET FUEL/KEROSENE

** The balance month March-April jet fuel/kerosene timespread was pegged at minus 24 cents/b at 0300 GMT March 8, narrowing from minus 38 cents/b at the 0830 GMT Asian close March 5.

** The FOB Singapore jet fuel/kerosene cash differential was assessed at minus 51 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments on March 5, widening 20 cents/b week on week.

** In Japan, kerosene stocks fell 3.9% week on week to 10.08 million barrels Feb. 27, the Petroleum Association of Japan said March 3, despite local refiners hiking kerosene output by 15.8% over the same period to 1.83 million barrels in the week to Feb. 27. Looking forward, industry sources said kerosene production would taper off with higher temperatures in Northeast Asia, and refiners would opt to produce more jet fuel over heating kerosene.

** Enterprise Singapore data showed that jet fuel imports plunged 99.95% week on week over Feb. 25-March 3 to just 10 mt, outlining the tepid demand for aviation fuels amid the COVID-19 pandemic.

** The Q2-Q3 quarterly jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus 32 cents/b over March 1-5, down 23 cents/b from the previous week's average of minus 9 cents/b.

GASOIL

** The balance March-April gasoil market structure was pegged at minus 6 cents/b at 0300 GMT March 8, narrowing slightly from minus 8 cents/b at the Asian close on March 5, Platts data showed.

** The March Exchange of Futures for Swaps spread was pegged at minus $1.20/mt at 0300 GMT March 8, widening from an assessed minus 87 cents/mt at the March 5 close.

** Healthy gasoil export volumes from China for March, as well as inflows of gasoil from India and the Persian Gulf into the region -- pulled to Asia by unworkable arbitrage economics to send gasoil barrels to the West -- may see supply outpacing demand.

** A narrowing EFS spread has spurred inflows of gasoil from India and the Persian Gulf toward Asia, with traders estimating that more than 1 million mt of the middle distillates could cross over for March arrival . The EFS spread has been narrowing on the back of poor fundamentals in the West, with demand for transportation still poor due to ongoing social distancing restrictions and the widespread adoption of work from home policies.

** The Q2-Q3 quarterly gasoil swap spread -- an indication of near-term sentiment -- averaged at plus 41 cents/b over March 1-5, down 20 cents/b from the previous week's average of plus 61 cents/b.