Asia middle distillates: Key market indicators for May 9-13

The Asian middle distillates complex is expected to remain strong during the week May 9-13, with selling interest well-supported by lofty product cracks, and buying interest growing on easing COVID-19 rules in the region, as well as increasing sanctions against Russian-origin barrels.

At 9:40 am Singapore time (0140 GMT), the front-month July ICE Brent crude oil futures contract was at $111.54/b, down 18 cents/b (0.16%) from Singapore close on May 6.

Jet Fuel/Kerosene

** The week ahead will likely see the Asian jet fuel/kerosene market hovering at steady to slightly firmer levels, amid stronger sentiment fueled by Europe's proposal to implement a phased ban on Russian oil imports. Market participants said this, as well some trading companies which have already imposed self-sanctioning measures, is likely to further trim the available supply of jet fuel in the market.

** Trade sources said supply tightness has already translated to strong prices for jet fuel being seen in the US and in Europe, with this helping to open arbitrage lanes to send Asian barrels to the West. The viability of arbitrage movements has come even as freight costs remain at lofty levels, with traders saying that rocketing jet fuel prices in the West have managed to offset the spike in freight rates.

** Brokers pegged the balance-month May-June jet fuel/kerosene time spread at plus $5.65/b at 0140 GMT May 9, up $1.05/b from plus $4.60/b at the Asian close May 6, S&P Global Commodity Insights data showed.

** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus $4.63/b to Mean of Platts Singapore jet fuel/kerosene assessments at the May 6 close, up 61.89% from $2.86/b /b at the start of the week on May 4, S&P Global data showed.

** The Q3-Q4 jet fuel/kerosene swap spread averaged plus $9.92/b over May 4-6, up from plus $7.89/b the week before.

Gasoil

** The Asian gasoil market continues to be well-supported even though arbitrage lanes to the West are squeezed shut on the back of soaring freight rates, and a narrowing EFS spread. Buyers are willing to pay for expensive cargoes amid thin supplies, as reflected by inventories in major gasoil trading hubs hovering at historically low levels.

** Brokers pegged balance-month May-June Singapore gasoil at plus $8.85/b at 0140 GMT May 9, ticking higher by 45 cents/b from plus $8.40/b at the Asian close May 6.

** The May EFS spread was pegged at minus $3.85/mt at 0140 GMT May 9, narrowing $14.69/mt from minus $18.54/mt at the May 6 close.

** Singapore's onshore commercial middle distillate stocks fell 14.03% week on week to 6.06 million barrels May 4, hurtling down to the lowest level in over eight years, Enterprise Singapore data released late May 5 showed. Middle distillate stocks were last recorded lower for the week ended Aug. 21, 2013, at 6.04 million barrels, historical data showed. Outflows of gasoil from Singapore totaled 323,469 mt over April 28-May 4, outpacing 37,690 mt of inflows by more than eightfold, the data showed.

** The Q3-Q4 gasoil swap spread averaged plus $11.26/b over May 4-6, up from plus $8.98/b the week before.