Asia middle distillates: Key market indicators for Sept 13-17

Asian middle distillate markets started the Sept. 13-17 trading week on a steady to firmer note, as tight regional supply boosted the sentiment in the gasoil sector while positive indicators on the air travel front continue to provide support for jet fuel prices.

At 10:10 am Singapore time (0210 GMT), the ICE October Brent crude futures contract was up 42 cents/b (0.57%) from the Sept. 10 close at $73.34/b.

Jet fuel/kerosene

** Brokers pegged the balance September-October jet fuel/kerosene spread at minus 5 cents/b at 0210 GMT Sept. 13, widening slightly from minus 4 cents/b at the 0830 GMT Asian close Sept. 10, S&P Global Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential remained in discount territory in the week ended Sept. 11, and was assessed at minus 8 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Sept. 10, rising 16 cents/b from the start of the week, Platts data showed.

** In Asia's largest jet fuel demand center of China, flight flows are showing a comeback with COVID-19 infections generally in control. Data from Radar Box showed commercial flight activity rising nearly 60% in the first week of September from the low point of mid-August. Flight traffic is expected to pick up further during the Mid-Autumn festival in September and during the seven-day long Golden Week holidays in early October, according to a Sept. 8 report by S&P Global Platts Analytics.

** Further support is expected to arrive in the fourth quarter as Japan starts its seasonal stockpiling of kerosene ahead of winter. However, traders have told Platts they do not expect the impact of prewinter kerosene imports to be felt before November due to milder temperatures in northeast Asia this year.

** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 22 cents/b over Sept. 6-10 from plus 33 cents/b the week before.

Gasoil

** The balance September-October gasoil market structure was pegged at plus 39 cents/b at 0210 GMT Sept. 13, narrowing from the plus 43 cents/b assessed at the 0830 GMT Asian close Sept. 10, Platts data showed.

** The October Exchange of Futures for Swaps, or EFS, spread was pegged at minus $13.75/mt at 0210 GMT Sept. 13, narrowing from minus $13.96/mt at the Sept. 10 Asian close, Platts data showed.

** Market participants expect the Asian gasoil market to remain supported in the coming week, with tight regional supply balances helping to buoy the sentiment. Already, spot gasoil cargoes for loading from north Asia during October have traded at higher levels than expected, with sources saying that this has set the tone for trading activity in the short term. "I think we will still continue to see support [over the coming week] -- there is no cheap resupply," a regional trader said.

** Singapore's middle distillate stockpiles tumbled to a 20-month low in the week ended Sept. 7, veering away from a seven-week high amid favorable arbitrage economics and tighter regional supply balances. Enterprise Singapore data released late Sept. 9 showed that gasoil, jet fuel and kerosene stocks at Asia's main trading hub fell 1.52 million barrels, or 13.27%, week on week to 9.92 million barrels Sept. 2-8. The stocks were last lower on Jan. 8, 2020, at 9.64 million barrels.

** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 93 cents/b over Sept. 6-10 from plus 80 cents/b the week before.