Asia middle distillates: Key market indicators for Sep 6-10

The Asian middle distillate markets began the Sept. 6-10 trading week on a softer note with the region's coronavirus situation denting sentiment in both the gasoil and jet fuel/kerosene sectors.

At 10 am Singapore time (0200 GMT), the ICE November Brent crude futures contract fell 81 cents/b (1.12%) from the Sept. 3 close at $71.80/b.

Jet fuel/kerosene

** Brokers pegged the balance-month September-October jet fuel/kerosene spread at minus 3 cents/b at 0200 GMT Sept. 6, narrowing from minus 9 cents/b at the 0830 GMT Asian close Sept. 3, S&P Global Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential fell deeper into discount territory to minus 23 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments for the week ended Sept. 3, losing 18 cents/b from the start of the week, Platts data showed.

** Market participants attributed the slump in the cash differential to weak air travel demand, which was bogged down by strict border controls or rigid travel restrictions in Asia. "The problem is border control measures ... A recovery of international travel needs governments to restore the freedom to travel," said Willie Walsh, the International Air Transport Association director general, in a Sept. 1 report.

** In India, aviation turbine fuel demand is expected to remain subdued in the near term as fears of a third wave of COVID-19 remain ahead of the upcoming festive season, with sources anticipating jet fuel prices to be weighed by fresh movement restrictions, if cases soar. While domestic travel has picked up in recent months, a potential spike in cases could derail this recovery. Meanwhile, international travel remains mostly out of bound as many countries worldwide persist with a travel ban on India.

** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 38 cents/b Aug. 30-Sept. 3 from plus 33 cents/b the week before.

Gasoil

** The balance September-October gasoil market structure was pegged at plus 41 cents/b at 0200 GMT Sept. 6, narrowing from the plus 44 cents/b assessed at the 0830 GMT Asian close Sept. 3, Platts data showed.

** The September Exchange of Futures for Swaps, or EFS, spread was pegged at minus $12.70/mt at 0200 GMT Sept. 6, widening from minus $12.59/mt at the Sept. 3 Asian close, Platts data showed.

** The beleaguered medium sulfur gasoil grade may experience some relief in the weeks ahead, with more demand outlets potentially opening up. Vietnam is mulling over resuming business activities from Sept. 15 in its hard-hit Ho Chi Minh City, following comments from the Prime Minister that the country's current mix of quarantines and strict lockdowns was not sustainable in the long run, according to local media reports late in the week ended Sept. 4. The standard grade used in the country is 500 ppm sulfur gasoil. In addition, the fishing ban in the South China Sea is due to be lifted by mid-September, with this also likely to boost demand for the 500 ppm sulfur gasoil grade from the high-seas fishing sector due to higher consumption of bunker fuel.

** Singapore's middle distillate stockpiles rose for the second straight week Sept. 1, crossing the 11 million-barrel mark to touch a seven-week high amid subdued demand in the region, especially Southeast Asia. Enterprise Singapore data released Sept. 2 showed that gasoil, jet fuel and kerosene stocks at Asia's main trading hub rose 572,000 barrels, or 5.26%, week on week to 11.44 million barrels in Aug. 26-Sept. 1. Inventories were last higher in the week ended July 14 at 11.48 million barrels.

** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 89 cents/b in Aug. 30-Sept. 3 from plus 61 cents/b the week before.