Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillates markets are expected to remain stable this week, with no significant uptick expected from current levels.

After weeks on a downtrend, the contango structure for middle distillates, Asian gasoil in particular, has relaxed, with traders saying the improved sentiment may persist due to tighter supply balances in the region, which has shored up product prices.

Asian jet fuel markets remain in a flux -- while some optimism has emerged as regional airlines have been adding flights, sentiment is generally bearish on the back of gloomy financial news from bellwether airlines, indicating that the industry faces a bumpy road ahead.

July ICE Brent crude futures rose $1.56 cents/b from last Friday's close to $33.71/b at 0300 GMT Monday.

JET FUEL/KEROSENE

** The front month June/July Singapore jet fuel timespread opened Monday on a weaker note at minus $1.73/b, down 11 cents/b from Friday's 0830 Asian close of minus $1.62/b.

** The bearishness stemmed from the continual lockdown in India, which was extended for the third time, to May 31. All domestic and international flights will remain suspended until then, with the exception of domestic air ambulances, medical and security flights and repatriation flights, the government said on Sunday.

** Asia Pacific airlines recorded massive losses as air passenger traffic dwindled. Hong Kong-based Cathay Pacific Group announced a HK$4.5 billion ($580 million) loss in the first four months of 2020 due to the global spread of the coronavirus.

** Meanwhile, flagship carrier, Singapore Airlines, posted its first-ever annual net loss in its 48-year history amounting to S$212 million ($148.8 million) for its 2019-2020 financial year ended March 31.

** That said, the Q3/Q4 quarterly jet fuel/kerosene spread -- an indication of near term sentiment -- narrowed to minus $2.87/b at the Asian close Friday, rising 55 cents/b from last Monday, as sentiment improved on rising domestic flights in Asia taking to the skies, hinting of a slight improvement in jet fuel demand.

GASOIL

** The Singapore June/July gasoil timespread opened Monday at minus 73 cents/b, up from Friday's close of minus 79 cents/b.

** The front month June Exchange of Futures for Swaps spread was pegged at plus $2.31/mt at 0300 GMT, down from plus $2.46/mt at Friday's Asian close.

** Some patches of regional spot demand have emerged, with market sources saying that the gradual easing of COVID-19 restrictions have spurred some countries to issue buy tenders.

** But traders have warned that the uptick in demand remains shaky and may not be sustainable, amid warnings of a possible second wave of COVID-19 cases as the risks of re-infection are high and lockdowns may be re-enforced.

** Latest news reports have stated that Thailand has eased some restrictions amid a fall in the number of coronavirus cases, but India on Sunday announced it has extended its nationwide lockdown to May 31. However, restrictions will be relaxed in certain areas with low numbers of confirmed cases.

** In the Persian Gulf, market participants are keeping a keen eye on a spot gasoil tender issued for sale by Kuwait Petroleum Corp. over the weekend, which will provide some directional pricing cues for the Middle East gasoil market. KPC is offering a 60,000 mt cargo for loading over June 6-7. The tender closes May 19.