ASIA MIDDLE DISTILLATES: Key market indicators for June 27-July 1

The Asian middle distillate market could see diverging fundamentals over June 27-July 1, with ample jet fuel/kerosene supplies capping the distillate's upside, while the gasoil complex remains strongly supported by growing demand.

Front-month August ICE Brent crude oil futures contract stood at $112.90/b at 9:40 am Singapore time (0140 GMT) June 27, up $2.30/b (2.08%) from the 0830 GMT Singapore close on June 24.

Jet Fuel/Kerosene

** Asian jet fuel may encounter some headwinds in the week ahead as sources said there was a possibility of healthy availabilities, which could leave the region well-supplied. The arbitrage to move jet fuel cargoes from Northeast Asia to the US west coast was reportedly unviable amid strong freight rates and lower prices in the Los Angeles market, which has added length to regional supply balances.

** In addition, attractive middle distillates crack spreads have led refiners to crank up middle distillate production, but jet fuel demand, which is still recovering, has been unable to catch up.

** Japan's jet fuel output rose 21.3% on the week to 1.47 million barrels over June 12-18, latest Petroleum Association of Japan data showed. Exports fell 41.9% over the same period to 719,029 barrels, with jet fuel stockpiles consequently being reported at 4.76 million barrels, up 2.7% for the week ended June 18.

** Brokers pegged July-August jet fuel/kerosene time spread at plus $2.35/b at 0140 GMT June 27, narrowing from plus $3.29/b at the June 24 Asian close, data from S&P Global Commodity Insights showed.

** Platts assessed FOB Singapore jet fuel/kerosene cash differential at plus $2.23/b to the Mean of Platts Singapore jet fuel/kerosene assessments June 24, down $1.03/b from the start of the week, S&P Global data showed.

** The Q3-Q4 jet fuel/kerosene swap spread averaged plus $14.89/b over June 20-24, up from plus $14.55/b the week before.

Gasoil

** Resilient gasoil demand is likely to set the tone for the middle distillate in the week ahead, with strength being borne out by robust gasoil cracks. Many Asian refiners continue to focus on the production of diesel as industrial, construction and road transportation activities rebound, with the upward momentum showing little signs of slowing down especially as more Asian countries move ahead with relaxing COVID-19 curbs.

** Brokers pegged July-August Singapore gasoil spread at plus $7.80/b at 0140 GMT June 27, down 20 cents/b from the Asian close June 24.

** The July EFS spread was pegged at minus $4.25/mt at 0140 GMT June 27, up $1.95/mt from the June 24 close.

** Singapore's onshore commercial middle distillate stocks rose 8.19% week on week to more than a two-month high of 8.61 million barrels over June 16-22, Enterprise Singapore data showed, despite the steep backwardation in the gasoil complex. Rising freight rates have limited the flow of Asian gasoil barrels to the West.

** Singapore remained a net exporter of gasoil over June 16-22, with outflows of 313,860 mt outpacing inflows of 183,652 mt, the Enterprise Singapore data showed, despite traders saying that a positive gasoil Exchange of Futures for Swaps spread was not providing much incentive for East-West moves.

** The Q3-Q4 gasoil swap spread averaged plus $17.76/b over June 20-24, up from plus $16.54/b the week before.