Asia middle distillates: Key market indicators for Aug 2-6

Asian middle distillate markets are starting the Aug. 2-6 trading week on a steady note, with tightening gasoil supply balances and healthy Asian exports supporting the sector, while demand for jet fuel/kerosene remain suppressed by tight travel restrictions amid a spike in COVID-19 transmissions caused by the delta variant.

At 10:00 am Singapore time (0200 GMT), the ICE September Brent crude futures contract was down $2.02/b (2.65%) at $74.31/b, from $76.33/b at the July 30 close.

Jet fuel/Kerosene

** The balance August-September jet fuel/kerosene market structure flipped into backwardation at plus 1 cent/b at 0200 GMT Aug. 2, narrowing 5 cents/b from the Asian close on July 30, Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential ended the week at minus 21 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments on July 30, falling 12 cents/b week on week, Platts data showed. The cash differential has been in discount territory for over two months and was last seen in premium territory on May 17, 2021 at plus 25 cents/b to MOPS jet fuel/kerosene assessments, Platts data showed.

** The Asian aviation sector continues to face headwinds on rising infections in the region, leading to tepid air travel demand. The latest report by the Association of Asia Pacific Airlines showed that the region's airlines carried only 1.4 million international passengers in June, just 4.4% of pre-pandemic June 2019 levels.

** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 50 cents/b over July 26-30, widening 6 cents/b from an average of 44 cents/b the week before.

Gasoil

** The balance August-September gasoil market structure was pegged at plus 10 cents/b at 0200 GMT Aug. 2, steady from the 0830 GMT Asian close on July 30, Platts data showed.

** The August Exchange of Futures for Swaps, or EFS spread, was pegged at minus $8.01/mt at 0200 GMT Aug. 2, narrowing slightly from minus $8.06/mt at the July 30 Asian close, Platts data showed.

** The week ahead could see the Asian gasoil market remaining steady to slightly firmer, as gasoil market participants reiterated that regional supply is tight on the back of deep cuts to gasoil outflows, most notably from North Asian producers. The crunch in supply has been reflected in four straight weeks of stock drawdowns as healthy exports caused middle distillate stockpiles in Singapore to tumble to a 77-week low of 10.81 million barrels for the week ended July 28, latest Enterprise Singapore data showed. Traders said the drop in stockpiles was largely led by gasoil.

** The earlier upward trend in the Asian gasoil complex appears to have tapered off, with a few sources cautioning that an uncertain demand recovery ahead is clouding the outlook even as regional supplies thin out. After reaching a nine-week high of plus 9 cents/b to the Mean of Platts Singapore gasoil assessments on July 27, the cash differential of FOB Singapore 10 ppm sulfur gasoil has steadily retreated, ending at plus 2 cents/b to MOPS gasoil assessments at the Asian close on July 30.

** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus $1.05/b over July 26-30, widening 15 cents/b from an average of plus 90 cents/b the week before.