Asia middle distillates - Key indicators this week

Singapore — The Asian middle distillates markets kicked off the week a tad higher, but sentiment is expected to remain weak for jet fuel and gasoil amid extended lockdowns in both Malaysia and India. June ICE Brent crude futures fell 16 cents/b from Friday's 0830 GMT close to stand at $27.92/b at 0300 GMT Monday.

JET FUEL/KEROSENE

**Singapore jet fuel front month May/June timespread opened Monday at a contango of minus $2.92/b, up 7 cents/b from Friday's close. That said, sentiment in the jet fuel market is likely to remain bearish as demand for aviation fuel continues to be crippled by the impact of the coronavirus pandemic.

**Underwhelming demand for jet fuel continues to weigh down the already sagging market, under the pressure of the coronavirus pandemic.

**In Singapore, the Changi Airport Group saw passenger traffic plunge to 1.65 million in March, down 70.7% over the same period last year. Looking forward, the group said that for April 2020, the number of scheduled flights at the airport is about 96% fewer compared with what was originally scheduled.

**Market participants expect the bear trend to persist at least until the end of the third quarter of this year, citing that air travel is not a necessity, and that near term recovery is not possible until a vaccine for the coronavirus is found.

**Steeper jet fuel discounts is expected, after the FOB Korea cash differential fell to an all-time low of minus 4.50/b to the Mean of Platts Singapore jet fuel/kerosene assessments on Friday. Industry sources said there was no real buying interest and storage was sought to capture the contango value.

**In the derivatives market, the Q3/Q4 Singapore jet fuel/kerosene spread remained in negative territory and was assessed at minus $4.23/b at the Asian close Friday, indicating continued near-term bearishness.

GASOIL

**Front month May/June Singapore gasoil timespread opened marginally higher Monday morning at minus $1.80 cents/b, edging up 3 cents/b from Friday's close of minus $1.83/b.

**The front-month May Exchange of Futures for Swaps spread was pegged at minus 75 cents/mt at 0300 GMT, narrowing from minus $1.95/mt at the Asian close Friday.

**Industry sources reiterated that cross-regional flows from Asia to west of Suez have been hampered by a strong EFS, adding that Indian and Middle East cargoes were likely to head East, amplifying supply pressures in Asia.

**Middle distillate stockpiles in Singapore -- Asia's main trading hub -- ballooned to a 43-month high of 14.93 million barrels for the week ended April 15 amid unviable arbitrage economics, trapping barrels within the region.

**Gasoil traders were eyeing award details from Bahrain Petroleum Co. or Bapco's sell tender to provide pricing indications for ultra-low sulfur diesel loading from the Persian Gulf. The company offered to supply 40,000-60,000 mt of 10 ppm sulfur gasoil for loading from Sitra over May 1-4. The tender closed on April 15, with validity expiring April 20.

**Extended lockdowns around the region, including India and Malaysia are expected to hammer demand, keeping cash differentials in negative territory. FOB Singapore cash differential for 10 ppm sulfur gasoil has weakened by more than three folds since the start of the month at minus $2.59/b to MOPS gasoil assessments on Friday, plunging from minus 84 cents/b on April 1.