ASIA MIDDLE DISTILLATES: Key market indicators for June 20-24

Sentiment in the Asian middle distillate market could come under slight pressure June 20-24, as supply tightness in the gasoil complex eases as refineries in Asia step up production to capitalize on attractive cracks, while increasing outflows of oil products from China could also weigh.

The front-month August ICE Brent crude oil futures contract stood at $112.79/b at 10:30 am Singapore time (0230 GMT) June 20, down $7.55/b (6.27%) from the 0830 GMT Singapore close on June 17.

Jet Fuel/Kerosene

** Asian jet fuel sources said the market has moved past earlier concerns regarding an increase in spot supplies brought on by the China's additional oil product export quotas announced on June 7, which had earlier weighed on sentiment. With output still curtailed as refiners maximize gasoil production over jet fuel as well as some Japanese refiners experiencing unscheduled maintenances which have further trimmed production volumes, some sources have said the Chinese exports might even be a welcome supply stream to meet increasing regional demand for jet fuel as air travel ramps up amid more border and quarantine restrictions being lifted.

** Japan's jet stocks fell 11.2% on the week to 4.63 million barrels for the week over June 5-11, Petroleum Association of Japan data released June 15 showed. The data also showed that local refiners slashed jet fuel production by 6.6% on the week to 1.21 million barrels for the week ended June 15.

** Brokers pegged the July-August jet fuel/kerosene time spread at plus $4.45/b at 0230 GMT June 20, narrowing from plus $4.53/b at the June 17 Asian close, data from S&P Global Commodity Insights showed.

** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus $3.28/b to the Mean of Platts Singapore jet fuel/kerosene assessments June 17, up 24 cents/b from the start of the week, S&P Global data showed.

** The Q3-Q4 jet fuel/kerosene swap spread averaged plus $14.55/b over June 13-17, down from plus $15.14/b the week before.

Gasoil

** Robust gasoil cracks continued to boost production and export volumes of the distillate in Asia, particularly as the turnaround season in Northeast Asia wraps up, bringing more capacity back online. With East-West arbitrage being hampered by strong freight and a steeply backwardated market structure, more barrels remained stuck within the Asia-Pacific region.

** Brokers pegged the July-August Singapore gasoil spread at plus $7.05/b at 0200 GMT June 20, down 6 cents/b from the Asian close June 17.

** The July EFS spread was pegged at minus $11.50/mt at 0200 GMT June 20, widening 61 cents/mt from the June 17 close.

** Singapore's onshore commercial middle distillate stocks rose 17.18% week on week to 7.96 million barrels over June 9-15, Enterprise Singapore data released late June 16 showed. The jump in inventories comes amid a steep backwardation in the gasoil complex and rising freight rates that have limited the flow of Asian gasoil barrels to the West. Traders said a narrowing gasoil Exchange of Futures for Swaps spread was also not providing much incentive to move Asian gasoil barrels to the West. Still, Singapore remained a net exporter of gasoil over June 9-15, with outflows of 278,331 mt outpacing inflows of 150,286 mt, the Enterprise Singapore data showed.

** The Q3-Q4 gasoil swap spread averaged plus $16.54/b over June 13-17, down from plus $17.13/b the week before.