Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillates complex kicked off the week on a firmer note, as demand is set to rise on winter stockpiling while regional supply tightens with less exports from Japan and South Korea as sellers focus on domestic markets.

ICE December Brent crude futures climbed 22 cents/b on the day to $39.90/b at 0300 GMT Oct. 5, from $39.68/b at the 0830 GMT Asian close on Oct. 2.

JET FUEL/KEROSENE

** Contango for balance month October-November Singapore jet fuel timespread narrowed 6 cents/b to be pegged at minus 65 cents/b at 0300 GMT Oct. 5, from minus 71 cents/b at the 0830 GMT Asian close on Oct. 2.

** Seasonal demand for heating kerosene ahead of winter coupled with severe supply shortage to give some respite to the jet fuel/kerosene complex.

** FOB Singapore jet fuel/kerosene cash differential narrowed 31 cents/b week on week to a discount of 74 cents/ to the Mean of Platts Singapore jet fuel/kerosene assessment on Oct. 2., S&P Global Platts data showed.

** FOB Singapore jet fuel/kerosene cracking margin against front month cash Dubai flipped to positive territory Oct. 1, and was assessed at plus 64 cents/b Oct. 2, rising $1.67/b week on week, Platts data showed.

** S&P Global Platts Analytics reported on Oct. 2 that Japanese kerosene demand should peak at around 500,000 b/d against likely domestic output of around 300,000 b/d, depending on temperatures. Japanese kerosene stocks are currently up by 10.7% versus a year-ago, but refinery runs are down by about 20%. The Japan Meteorological Agency is currently forecasting below-average temperatures for 10 of the country's 12 regions over December-February.

** Outlook for the Asian aviation sector remains bleak as international air travel demand trickled to a drip amid rising infection rates. According to Fitch ratings, air passenger traffic in several Asia-Pacific markets is forecast to remain well below 2019 levels in 2021 as a vaccine is unlikely to become widely available in the year.

GASOIL

** Balance month October-November gasoil market structure was valued at a contango of minus 52 cents/b at 0300 GMT Oct. 5, narrowing 11 cents/b from the minus 63 cents/b assessment at the 0830 GMT close on Oct. 2, Platts data showed.

** The October Exchange of Futures for Swaps spread was pegged at plus $2/mt at 0300 GMT Oct. 5, strengthening from plus 64 cents/mt at the Oct. 2 Asian close.

** FOB Singapore gasoil cargo crack against front month cash Dubai was assessed at $3.40/b at the Asian close on Oct. 2. The spread had tumbled to $1.63/b on Sept. 24, marking the lowest crack value since the benchmark FOB Singapore gasoil assessment moved from 500 ppm to 10 ppm sulfur gasoil on Jan. 2, 2018, Platts data showed.

** Market participants cautioned that the Asian gasoil market continues to face headwinds due to sluggish regional and export demand, capping the upside for the middle distillate.

** Singapore's commercial onshore middle distillate stockpiles continued to hover above the 15-million-barrel mark for the fifth consecutive week, illustrating an overall slow digestion and drawdown of inventory, Enterprise Singapore data showed Oct. 1. Stockpiles in the city-state were registered at 15.27 million barrels for the period of Sept. 24-30, down 2.5% on the week. But gasoil outflows were lower than the week before as a resurgence in COVID-19 infections and strict border controls continued to weigh on regional demand.