Asia middle distillates: Key market indicators this week

Singapore — The Asian middle distillates complex in the week starting March 29 will likely continue to face pressure from tepid demand and growing supply. Gasoil has seen key producers inject fresh volumes into the region with demand still unable to keep up. Meanwhile, mixed signals on the aviation front hint at the bumpy road ahead for the jet fuel/kerosene complex.

ICE May Brent crude futures were up $1/b at $64.30/b at 0300 GMT March 29, from $63.30/b at the 0830 GMT Asian close on March 26.

JET FUEL/KEROSENE

** The front month April-May jet fuel/kerosene timespread was pegged at minus 37 cents/b at 0300 GMT March 29, narrowing 3 cents/b from minus 40 cents/b at the 0830 GMT Asian close March 26.

** The FOB Singapore jet fuel/kerosene cash differential extended its decline and was assessed at minus 62 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments March 26, falling 15 cents/b or 31.91% week on week.

** Japan's kerosene stocks rose 5.4% week on week to 9.25 million barrels March 20, the Petroleum Association of Japan said March 24. Local refiners raised their kerosene output by 11.6% week on week to 1.93 million barrels in the week to March 20, S&P Global Platts reported.

** Enterprise Singapore data showed that the city-state became a net importer of jet fuel in the week of March 18-24, with imports rising to 35,602 mt from a mere 7 mt the previous week. According to the data, the bulk of the imports came from China at 35,576 mt.

** The Q2-Q3 quarterly jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus 97 cents/b over March 22-26, widening 10 cents/b from the previous week's average of minus 87 cents/b.

GASOIL

** The April-May gasoil market structure was pegged at minus 20 cents/b at 0300 GMT March 29, narrowing from minus 24 cents/b at the Asian close on March 26, Platts data showed.

** The April Exchange of Futures for Swaps spread was pegged at minus $5.75/mt at 0300 GMT March 29, marginally wider from an assessed minus $5.63/mt at the March 26 close.

** Persistent supply length may continue to characterize the Asian gasoil market in the week ahead, with this expected to maintain downward pressure on the complex. Gasoil traders said that with arbitrage lanes to move Asian gasoil barrels West currently closed, some India and Persian Gulf-origin barrels were pointing toward Singapore. Should these barrels flow in, it would augment already high regional supplies.

** Apart from potential inflows of gasoil from India and the Persian Gulf, sources said the downward pressure on the market has also been spurred by healthy gasoil exports from China, which have come even as regional demand has been holding steady for months. Traders estimate that gasoil exports from China in March could be as high as 2.6 million mt, while estimates are holding at around 2 million mt for April exports.

** The Q2-Q3 quarterly gasoil swap spread -- an indication of near-term sentiment -- fell deeper in negative territory and averaged at minus 32 cents/b over March 22-26, down 23 cents/b from the previous week's average of minus 9 cents/b.