Asia middle distillates: Key market indicators for May 4-6

The Asian middle distillates complex is expected to remain volatile during May 4-6, with market participants keenly watching for developments on the possibility of an embargo on Russian oil in the EU, which could lead to importing countries in the EU increasing their reliance on Asian barrels.

At 11 am Singapore time (0300 GMT), the front-month July ICE Brent crude oil futures contract was at $105.78/b, up 81 cents/b (0.77%) from the May 3 settlement.

Jet fuel/Kerosene

** Activity in the Asian jet fuel/kerosene complex is expected to remain steady to slightly lower later in the week amid ongoing regional holidays, which will see many market participants away from desks.

** While some supply concerns remain -- due to large outflows from China and soaring freight rates which have worsened arbitrage economics and trapped more barrels of jet fuel within the region -- sources said a level of support has been placed under the Asian jet fuel/kerosene market. It has seen a steady increase in demand as more countries reopen borders and with airlines scheduling more flights to meet air travel demand.

** Brokers pegged the balance-month May-June jet fuel/kerosene time spread at plus $5.35/b at 0300 GMT May 4, up 85 cents/b from plus $4.50/b at the Asian close April 29, S&P Global Commodity Insights data showed.

** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus $1.43/b to Mean of Platts Singapore jet fuel/kerosene assessments at the April 29 close, up 15 cents/b, or 11.72%, from the start of the week on April 25, S&P Global data showed.

** Japan's jet fuel stocks rose 4.5% week on week to 4.88 million barrels over April 17-23, according to latest Petroleum Association of Japan data released April 27. The increase comes on the back of a hike in jet fuel output, which rose 10% on the week to 1.19 million barrels for the week ended April 23. The data also showed that Japan's jet fuel outflows were up 7.6% on the week to 543,815 barrels for the week ended April 23.

** The Q3-Q4 jet fuel/kerosene swap spread averaged plus $7.89/b over April 25-29, up from plus $6.91/b the week before.

Gasoil

** Increasingly viable arbitrage economics, amid growing expectations of the EU sanctioning Russian oil product exports, are providing an additional measure of support to an already tight Asian gasoil complex. Robust gasoil cracks continue to incentivize refineries to maximize their yield of gasoil, and export any excess barrels.

** Brokers pegged balance-month May-June Singapore gasoil at plus $8.40/b at 0300 GMT May 4, ticking lower by 19 cents/b from plus $8.59/b at the Asian close April 29.

** The May EFS spread was pegged at minus $71.62/mt at 0300 GMT May 4, widening $7.10/mt from minus $64.52/mt at the April 29 close.

** Singapore's onshore commercial middle distillate stocks fell 21.94% week on week to 7.04 million over April 21-27, snapping two straight weeks of increase, Enterprise Singapore data released late April 28 showed. Total inflows of gasoil into Singapore were recorded at 213,024 mt in the week to April 27, outpaced by total outflows of 260,622 mt.

** The Q3-Q4 gasoil swap spread averaged plus $8.98/b over April 25-29, up from plus $7.46/b the week before.