Weekly outlook: Asia gasoil, jet fuel

Singapore — The Asian middle distillates market kicked off the week on a subdued note, with both the jet fuel and gasoil markets seen steady to slightly weaker on the back of extended lockdowns in both Malaysia and India. June ICE Brent crude futures fell 8 cents/b from Thursday's 1230 GMT close to stand at $32.85/b at 0300 GMT Monday.

JET FUEL/KEROSENE

**Singapore jet fuel prompt balance April/May timespread opened Monday at minus $3.68/b, down 11 cents/b from Thursday's Asian close of $3.57/b, as demand for jet fuel in the aviation sector was crippled by the impact of the coronavirus pandemic.

**Prolonged bearishness is expected to persist in India as the 21-day lockdown looks set to be extended. According to local media reports, some states have already announced that the lockdown will be extended, despite ongoing discussions on the matter.

**In South Korea, industry sources pointed out the possibility of a further bearish market as sellers offered steep discounts for jet fuel amid a supply glut and underwhelming demand. According to industry sources, South Korea's GS Caltex recently sold up to 770,000 barrels of jet A-1 for loading over May at a steep discount of minus $3.50/b to May average of Mean of Platts Singapore jet fuel assessments, FOB.

**Market participants expect steeper discounts on jet fuel trades this week as the aviation sector continued to see demand carnage as a result of the coronavirus pandemic. "Demand has yet to bottom out [in South Korea]," a refining source said.

**In the derivatives market, the Q3/Q4 Singapore jet fuel/kerosene spread remained in negative territory and was assessed at minus $4.09/b, indicating continual near term bearishness.

GASOIL

**Singapore prompt balance April/May gasoil timespread opened Monday morning at minus $1.68 cents/b, up just a slight 2 cents/b from Thursday's close of minus $1.70/b.

**The front-month April Exchange of Futures for Swaps spread was pegged at minus $3.88/mt at 0300 GMT, down from minus $3.65/mt at the Asian close Thursday.

**Asian gasoil traders said arbitrage lanes to move Asian gasoil to the West are closed due to the firm EFS.

**Indian gasoil volumes are pointed towards the East, with sources saying up to 1 million mt may flow over in April.

**Asian gasoil demand is expected to contract even more amid extended lockdowns seen in Malaysia and India.

**This trend may continue as surplus gasoil barrels being pushed into the Asian market, especially from India.

**Already, spot gasoil volumes from India have been on the rise. April's offered volumes for gasoil from spot tenders are close to 900,000 mt. This compares to 271,000 mt offered for the whole of March, according to Platts' observations.