Asia middle distillates: Key market indicators this week

Singapore — Fundamentals in the Asian middle distillate markets is little changed from previous weeks for the week starting April 5. Gasoil continues to be characterized by a persistently growing supply length and lukewarm demand, while several industry indicators on the aviation front have said that the outlook for jet fuel remains challenging.

ICE June Brent crude futures were up $1.59/b at $64.47/b at 0300 GMT April 5 from the 0430 GMT Asian close on April 1.

JET FUEL/KEROSENE

**The balance April-May jet fuel/kerosene timespread was pegged at minus 43 cents/b at 0300 GMT April 5 narrowing 3 cents/b from minus 48 cents/b at the 0830 GMT Asian close on April 1.

**The FOB Singapore jet fuel/kerosene cash differential extended its decline and was assessed at minus 66 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments on April 1, falling 4 cents/b week on week.

**Japan's jet fuel stocks fell 2.2% week on week to 4.79 million barrels on March 27, the Petroleum Association of Japan reported on March 31, as jet fuel consumption rose after Japan lifted the state of emergency measures on March 21. Kerosene stocks, however, rose by 3.5% week on week to 9.57 million barrels in the same week.

**The outlook on the aviation sector remains challenging. In a recent report on March 29, the UN World Tourism Organization expects international tourist arrivals to be down about 85% in the first quarter of 2021 over the same period of 2019. This would represent a loss of some 260 million international arrivals when compared with pre-pandemic levels.

** The Q2-Q3 quarterly jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus 77 cents/b over March 29-April 1, up 20 cents/b from the previous week's average of minus 97 cents/b.

GASOIL

** The balance April-May gasoil market structure was pegged at minus 21 cents/b at 0300 GMT April 5, narrowing slightly from minus 22 cents/b at the Asian close on April 1, Platts data showed.

** The April Exchange of Futures for Swaps spread was pegged at minus $3.56/mt at 0300 GMT April 5, narrowing from an assessed minus $4.71/mt at the April 1 close.

** Sentiment in the Asian gasoil market is expected to remain bearish this week April 5-9, with trade sources saying the region remains well supplied. A combination of healthy exports from China, spot supply tenders issued by some refiners and a closed arbitrage to move Asian gasoil to the West have resulted in readily available barrels in the market, even as demand has plateaued.

** Heaping further bearishness is the growing uncertainty over the pace of gasoil demand, which while holding steady, looks increasingly uncertain with the rise of different strains of COVID-19, some of which have been reported to be linked to reduced vaccine protection. According to local media over the weekend, India reported its highest surge in coronavirus cases in six months, while the Philippines reported a record rise in cases. Japan, meanwhile, is facing a possible fourth wave of cases, with the government announcing on April 1 that it will reimpose emergency measures in Osaka to curb a spike in infections.

** The Q2-Q3 quarterly gasoil swap spread -- an indication of near-term sentiment -- averaged minus 17 cents/b over March 29-April 1, up 15 cents/b from the previous week's average of minus 32 cents/b.